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By Duncan Martell
PALO ALTO, Calif., June 22 (Reuters) - 3Com Corp., the No.
2 maker of computer-networking equipment, on Tuesday posted a
34 percent rise in quarterly profit -- in line with estimates
-- and added 15 million shares to its stock buyback program.
The company said profits for its fourth quarter ended May
28 rose to $88 million, or 24 cents a share, from year-ago
profit of $65.9 million, or 18 cents. Analysts expected
earnings of 23 cents a share, according to First Call Corp.
Revenue rose 3 percent to $1.42 billion from $1.38 billion.
Santa Clara, Calif.-based 3Com <COMS.O> also said it would
buy back as many as 15 million more shares from time to time in
the open market. It said it had repurchased 10.6 million shares
in its fourth quarter, bringing the total amount spent on
buybacks since June 1998 to $14.8 million. 3Com said 20.2
million shares were now available for repurchase.
3Com is realigning its business in an attempt to revive
revenue and profit growth in the face of stiff competition and
a slide in its stock price from a year-high of $51.125. Sales
of 3Com's popular Palm computing device, for example, now
account for more than 10 percent of the company's revenue,
Chairman Eric Benhamou said on a conference call.
In regular trading on the Nasdaq, 3Com rose 56 cents to
$31.50. In after-hours trading, the stock slipped to $31.125.
Using wireless technology is a big part of its growth plan,
said 3Com President and Chief Operating Officer Bruce Claflin
in an interview. In addition, 3Com will continue its push to
invest more in faster-growing business like the Palm unit and
would not make Herculean efforts to reverse the decline of its
slower-growing businesses such as analog modems.
The restructuring has to date been most apparent in its
Palm business. Earlier Tuesday, 3Com and America Online Inc.
<AOL.N> said they would work together to enable AOL customers
to receive their e-mail on their Palm devices. And last week,
Sun Microsystems Inc. <SUNW.O> and 3Com said Sun's Java
programming language would be integrated into the next Palm.
More is on the way, Claflin said. "We are tightening the
focus and you will see evidence of that in the next few
months," he said.
3Com continued to keep costs under control, where operating
expenses rose just 7.9 percent in the fourth quarter to $551.5
million from $511.2 million a year ago. It also made further
gains in paring down its inventory.
But analysts, while they credited the tight operational
controls, said they believed 3Com must still articulate a
clearer long-term growth strategy to investors and customers.
"They didn't give much of a road map, which is what
investors are looking for," said analyst Paul Sagawa at Sanford
Bernstein in New York.
Sagawa, who believes that 3Com should divest some of its
slower-growing businesses, such as modems and
computer-connector cards, said Benhamou, during a
teleconference call with analysts, side-stepped a question
about that possibility.
Claflin also declined comment, saying only, "Obviously, we
look at what is the best way to get shareholder value."
Benhamou also said 3Com had sold more than 4 million Palm
devices, and that sales of its Corebuilder 9000
local-area-network switch rose 30 percent from the third
quarter. The Corebuilder 9000 is 3Com's highest-end product.
Systems revenue was 55 percent of total sales, or $784.7
million, up 17 percent from a year ago. Client-access sales,
which include modems and connector cards, accounted for 45
percent of total revenue, down 10 percent from a year ago.
Sales in the United States were strong, Chief Financial
Officer Christopher Paisley said on the call, rising 7 percent
from a year ago to $760.6 million. International revenues
slipped 1 percent to $655.0 million, reflecting a slowdown |
