SANTA CLARA, Calif.--(BUSINESS WIRE)--March 20, 1997--Data
networking leader 3Com Corporation (NASDAQ:COMS) today announced
financial results for its third fiscal quarter, ended February 28,
1997.
For the quarter, sales increased 30% from the same period a
year-ago, to $786.8 million. Net income for the quarter was $87.6
million, or $0.47 per share, up from $0.42 per share in the
year-ago period. These results were in line with the Company's
expectations, previously announced on February 10.
Sales of systems products, including switches, hubs,
internetworking and remote access products, were $432.6 million for
the quarter, an increase of 24% compared to the year-ago period.
Sales of network adapters increased 39% from the same quarter a year
ago, to $346.3 million.
For the first nine months of fiscal 1997, sales were $2,317.2
million as compared with $1,666.8 million for the same period a year
ago. Exclusive of non-recurring items in both periods, net income
for the first nine months of fiscal 1997 was $291.4 million ($1.57
per share), an increase of 47 percent over net income of $197.6
million ($1.12 per share) posted in the first nine month of fiscal
1996.
"3Com's stature as a leading provider of end-to-end networking
systems continues to grow," said Eric Benhamou, chairman and chief
executive officer of 3Com. "During the quarter we saw strong demand
for our high-end networking solutions, particularly ATM systems, and
the number of multi-million dollar orders we received from large
accounts has never been greater."
"At the same time, our industry is in the midst of many important
transitions," continued Benhamou. "These transitions include the
adoption of higher-speed technologies, new paradigms for switching
and routing network traffic, and more volume-based pricing and
distribution. While these changes are all positive for 3Com and the
industry in the long run, during the current quarter our results
reflected increased price competition and a pause in industry demand
as enterprise networking customers and network service providers
assess how best to maximize their networking investments."
On February 26, 3Com announced a definitive agreement to merge
with U.S. Robotics Corporation, the leading supplier of products and
systems for accessing information across the wide area network,
including modems and remote access products. The combined company,
which will retain the 3Com name, will have revenues in excess of $5
billion annually and employ over 12,000 people worldwide. 3Com and
U.S. Robotics each hold leadership positions in important networking
markets and together will be able to provide customers with
comprehensive LAN/WAN networking solutions that include network
interface cards and high-speed modems, to workgroup and enterprise
switching solutions, and remote access and wide area networking
products.
"By combining 3Com's capabilities and leadership position in the
enterprise and local area networking market with U.S. Robotics
capabilities and leadership position in remote access and modem
markets, we can create a networking company with the ability to
deliver integrated end-to-end LAN and WAN solutions to the broadest
set of customers in the industry," said Benhamou. "And, by
leveraging our combined investments in R&D, manufacturing and
distribution, we can take advantage of the synergies that exist
between the two companies in order to earn a better return for our
shareholders."
Under the terms of the agreement, each share of U.S. Robotics
stock will be exchanged for 1.75 shares of 3Com stock. The
transaction will be accounted for as a pooling of interests, and is
expected to be neutral to slightly accretive to 3Com earnings in
fiscal 1998. Completion of the transaction is subject to approval of
both companies shareholders as well as certain regulatory approvals.
A preliminary S-4 proxy statement/prospectus is on file with the
Securities and Exchange Commission, and the companies have filed
pre-merger notification reports under the Hart-Scott-Rodino Act.
During the quarter, the company made a number of important new
product announcements. In January 3Com joined with industry leaders
Cascade and IBM to announce plans to cooperate in the implementation
of end-to-end IP switching solutions designed to provide faster
access to information across corporate networks and the Internet.
The three vendors will deliver their solutions, including FastIP from
3Com, in the second half of calendar 1997.
In March, 3Com introduced TranscendWare(TM) software, a
comprehensive set of integrated software modules that are embedded in
3Com's broad line of networking systems and network interface cards
and which boost overall performance of network applications.
TranscendWare software provides a revolutionary new dimension in
networking called "policy-based 3D networking" that will enable
MIS and business managers to specify the behavior of their
multivendor networks according to business needs and organizational
objectives, and ensure that individual users' applications receive
appropriate service level and priority.
Also in March, Computerworld magazine reported that in a poll of
over 1,600 network managers, 3Com ranked first in each of the survey
categories of product quality, service and support, and cost of
ownership. 3Com ranked ahead of competitors Cisco Systems, Bay
Networks and Cabletron.
This news release, other than the historical financial
information, may consist of forward-looking statements that involve
risks and uncertainties, including, but not limited to, quarterly
fluctuations in results, timely availability of new products,
competitive pricing and promotional activities, and changes in
overall demand levels for computer networking products. For a more
detailed discussion of the risks and uncertainties related to the
Company's business, please refer to the Company's most recent
quarterly report on Form 10-Q, for the quarter ended November 30,
1996, filed with the SEC.
3Com Corporation has helped more than 50 million people gain
access to critical information through high speed networks. Designed
to serve large enterprises, service providers, small offices and
homes, 3Com products provide a scalable architecture to meet the
immediate and long term connectivity needs of today's user. With
research and development on three continents, 3Com is one of the data
networking industry's largest and fastest growing companies. The
company's innovative marketing, engineering, sales and support
simplify communication, optimize network reliability and protect
customer investments. For further information, visit 3Com World Wide
Web site at 3com.com or call 1-800-NET-3Com.
NOTE TO EDITORS: 3Com is a registered trademark of 3Com
Corporation. TranscendWare is a trademark of 3Com Corporation. All
other trademarks are the property of their respective owners.
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3Com Corporation
Consolidated Statements of Income
(Unaudited. In thousands, except per share data.)
Quarter Ended Nine Months Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
1997 1996 1997 1996
Sales $786,778 $606,002 $2,317,214 $1,666,835
Cost of Sales 358,316 284,819 1,056,269 787,088
Gross margin 428,462 321,183 1,260,945 879,747
Operating expenses:
Sales and marketing 175,818 122,816 482,574 343,947
Research and development 91,390 59,830 242,511 167,460
General and administrative 31,883 25,527 97,479 69,370
Acquisition-related charges -- -- 6,600 69,000
Total operating expenses 299,091 208,173 829,164 649,777
Operating income 129,371 113,010 431,781 229,970
Other income - net 6,513 1,743 14,234 4,926
Income before taxes 135,884 114,753 446,015 234,896
Income tax provision 48,239 40,163 161,229 86,540
Net income $ 87,645 $ 74,590 $284,786 $148,356
Earnings per share
Primary $ 0.47 $ 0.42 $ 1.54 $ 0.84
Fully-diluted $ 0.47 $ 0.42 $ 1.53 $ 0.84
Shares used in computing per share amount:
Primary 187,215 177,378 185,442 175,843
Fully-diluted 187,218 177,868 185,842 176,261
Net income for the nine months ended February 28, 1997 included a
charge of approximately $6.6 million for merger costs associated with
the acquisition of OnStream Networks, Inc. Excluding this charge,
proforma net income was $291.4 million ($1.57 per share). Net income
for the nine months ended February 29, 1996 included a charge of
approximately $69.0 million for merger costs associated with the
acquisition of Chipcom Corporation. Excluding this charge, proforma
net income was $197.6 million ($1.12 per share).
3Com Corporation
Condensed Consolidated Balance Sheets
(In thousands)
Feb. 28, 1997 May 31, 1996
ASSETS (unaudited)
Current Assets:
Cash, cash equivalents and temporary
cash investments $794,013 $499,337
Trade receivables 504,718 359,182
Inventories 255,531 241,018
Other 189,411 140,174
Total current assets 1,743,673 1,239,711
Property and equipment - net 342,760 246,652
Deposits & other assets 47,780 38,754
Total $2,134,213 $1,525,117
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 169,360 $ 120,211
Accrued and other liabilities 279,396 211,620
Income taxes payable 135,019 82,690
Total current liabilities 583,775 414,521
Long-term debt 110,000 110,000
Other long-term obligations 5,192 5,492
Deferred income taxes 28,865 16,299
Shareholders' Equity:
Common stock 761,338 597,452
Unamortized restricted stock grants (5,794) (4,487)
Notes receivable on common stock (7) --
Retained earnings 647,717 379,358
Unrealized net gain on
available-for-sale securities 4,516 7,159
Accumulated translation adjustments (1,389) (677)
Total shareholders' equity 1,406,381 978,805
Total $2,134,213 $1,525,117
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