3-Com--3Com's Fiscal 2nd-Quarter Loss
Wasn't as Bad as It Had Feared
A WSJ.com News Roundup
SANTA CLARA, Calif. -- 3Com Corp. reported a sharp decline in sales for its fiscal second quarter but its loss wasn't quite as bad as the networking-products maker projected when it issued a warning earlier this month.
For the three months ended Dec. 1, 3Com said its net loss came to $142.4 million, or 41 cents a diluted share, compared with net income of $177.3 million, or 51 cents a share, in the year-earlier period. Revenue fell 35% to $789.5 million from $1.21 billion a year earlier.
Excluding acqusition-related expenses, a gain from the sale of land, a charge for the settlement of a shareholder lawsuit and losses from investments, the company said it would have posted a loss of $52.4 million, or 15 cents a share.
Hurt by a slowdown in capital spending by telecommunications customers, 3Com earlier this month projected revenue of between $785 million and $800 million, down from previous forecasts of $870 million to $910 million, and said it expected to report a loss from operations of between 19 cents a share and 23 cents a share.
The company's gross profit margin came to 37%, up from 36% in the fiscal first quarter.
3Com, whose competitors include formidable Cisco Systems Inc., earlier this month blamed the revenue shortfall on the turmoil in the telecom industry that has resulted in restructuring of top-tier carriers such as AT&T Corp. and consolidation and financing problems among smaller carriers. These issues have caused many of 3Com's customers to put off purchases of networking equipment.
The company said its carrier-equipment business was hardest-hit by the slowdown in customers' decision-making. 3Com said Thursday sales in that portion of its business came to $95.4 million, a decrease of 43% from the fiscal first quarter.
"The significant slowdown in the telecom industry adversely impacted 3Com during the quarter," Bruce Claflin, 3Com's president and chief operating officer, said in a prepared statement. "However, we remain bullish on the potential of the telecom industry and, in particular, the prospects for our Carrier Networking Business."
3Com also announced plans to set up CommWorks Inc., a unit that will contain the company's carrier-networking business, and realign its operating structure to "enhance focus and efficiency of costs."
3Com said the restructuring, along with "modest" revenue growth, are expected to lead to operating profitability in the first quarter of fiscal 2002.
The company expects to record a one-time charge of $40 million to $60 million in the fiscal third quarter for the restructuring. The initiatives are expected to save $200 million to $250 million annually.
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