3Com Beats Estimates, Warns Of Continued Downturn

3Com

Still, Bruce Claflin, 3Com president and CEO, said 3Com's cost-cutting and restructuring efforts over the past year give the company a strong base from which to weather the current economic slowdown and even gain market share.

3Com Tuesday posted revenue of $339 million for its quarter ended May 31, down 5 percent from the prior fiscal quarter. The loss for the quarter was $24 million, or 7 cents per share. That compares with sales of $468 million in the fourth quarter of fiscal 2001, with a loss of $517 million, or $1.52 per share.

Pro forma net income for the quarter was $13 million, or 4 cents per share, 6 cents better than First Call consensus estimate of a 2 cents per share loss.

For the fiscal year ended May 31, 3Com posted revenue of $1.48 billion, down from revenue of $2.8 billion in the prior fiscal year. The loss for the year was $595 million, or $1.71 per share, compared with a loss of $965 million, or $2.80 per share, in the prior fiscal year.

Claflin said 3Com finishes its fiscal year in "fundamentally better shape in almost every aspect from customer relations to financial performance."

Speaking to analysts and investors on a conference call, Claflin said, "The depressed conditions that plagued our industry the past year and a half continue to persist and the turning point is not yet possible to forecast."

Despite the overall slump, there are opportunities for growth, Claflin said. He expects the enterprise market in the United States to improve slightly and expects 3Com to gain market share. 3Com's enterprise infrastructure product sales grew 3 percent in the second half of the year vs. the first half, he said.

Moreover, key market segments generated strong growth for 3Com in the quarter, Claflin said. Layer 3 fixed Gigabit switch revenue grew 16 percent sequentially, and wireless LAN and IP telephony garnered "double digit" sequential revenue growth, he said.

"3Com is well-positioned to deal with the current market slowdown and we look forward with optimism to the turnaround," Claflin added. "The questions about our very survival are well behind us."

Claflin said 3Com's year of restructuring and new product development have left it well-positioned to compete in the networking market. "We can compete at any level--features, function, quality, support and price," he said. "Our partners make more money selling our products and our customers get more value buying us."