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STOCK WATCH

Robotics Has Strong Modem Operandi

July 29, 1996|From Bloomberg Business News

Shares of U.S. Robotics Inc., down 20% since Wednesday's earnings report, are considered a buy by some analysts who expect the company's modem business to gain.

The stock, which dropped 1 49/64 Friday to 52 3/4, "was inexpensive before; now it's cheap," said Steven Levy, an analyst at Oppenheimer & Co. His "buy" recommendation is based on his belief that the stock will rise to near $130 in the next 12 months.

Late Wednesday, U.S. Robotics said fiscal fourth-quarter sales growth will slow compared with the third quarter, triggering a decline in the stock. The company also reported that fiscal third-quarter earnings more than doubled to $63.3 million, or 66 cents a share.

Analysts said investors overreacted after the company said it did not expect a repeat of the 20% sales growth it had in the third quarter, when it increased production to meet pent-up demand. It said sales will return to a more normal 15% growth rate in the fourth quarter.

Some analysts said U.S. Robotics, based in Skokie, Ill., fell prey to short sellers, who were looking for an opportunity to sell the stock. In a short sale, investors borrow shares from a broker and sell them, betting that the price will decline so they can buy the stock back at lower levels.

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