Keep 3Com on Hold

After Bain Capital Partners broke off a deal with China's Huawei Technologies to buy 3Com Corporation (COMS - Analyst Report), the U.S. network equipment maker has begun trading on fundamentals of the business, which we believe are still poor.

The stock is now trading well below the price that the acquisition was announced at. The company has since attained profitability on a non-GAAP basis, improved other operating metrics, and announced plans of an initial public offering for TippingPoint. Although it has not updated its intentions for TippingPoint, we believe 3Com will likely pursue plans for the IPO.

With fairly strong third quarter results, we believe current holders of COMS shares would be better served by holding the shares for a more attractive exit point. We therefore maintain our Hold rating with a six-month target price of $2.50.

Read the full analyst report on COMS