3Com's Early Christmas Gift: Higher Than Expected Earnings

The overall earnings, which included sales decreases far less painful than expected, paint a stronger picture than previous quarters of 3Com, which is in the process of being acquired by Hewlett Packard.

For the quarter ended Nov. 27, 3Com reported profit of $20 million at 5 cents per share, up from $12.9 million at 3 cents per share from the same quarter a year ago.

Revenue for the quarter was $322.2 million, down 9.1 percent from a year earlier, but stronger than the $295 million to $305 million revenue range 3Com had forecast in September.

Gross margin was up to 60.1 percent from 56.3 percent, which 3Com attributed to ongoing cost reductions.

"We are pleased with 3Com's performance in the quarter," said Bob Mao, 3Com's CEO, in a statement. "We exceeded our guidance for revenue, operating profit, earnings per share, and our cash balance, while delivering sequential revenue growth across all our sales regions and achieving record gross and operating margins."

HP's planned $2.7 billion acquisition of 3Com, announced Nov. 11, stands to give HP an advantage in its growing rivalry with Cisco Systems. Among several strengths, the acquisition gives HP access to 3Com's H3C core and edge switches and TippingPoint network security products, as well as 3Com's voice portfolio -- a new area for HP -- and the low-end switches and routers in its OfficeConnect line.

Furthermore, 3Com would give HP a larger reach into exploding networking and infrastructure markets like China, where 3Com, thanks to its strategic alliance with Huawei, commands a 30 percent networking market share.

Solution providers have been telling ChannelWeb.com since the acquisition's announcement that HP is too wise to ignore those highlights, although until the acquisition closes it'll be unclear how HP's and 3Com's channels will blend.