3Com Warns of Revenue Shortfall, Will Exit Consumer-Modem Business
A WSJ.COM News Roundup
SANTA CLARA, Calif. -- 3Com Corp. warned that its fiscal fourth-quarter revenue will fall well short of expectations, citing worsening business conditions, and announced that it will stop selling consumer cable and digital subscriber-line modems.
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The computer-networking equipment maker late Thursday said revenue would come in between $450 million to $475 million for the quarter ended June 1, citing lower sales volumes, higher inventories and one-time restructuring charges. 3Com also said that it expects gross margin to dip into negative territory, while cash and equivalents are expected to be between $1.5 billion and $1.6 billion.
3Com in March had projected it would report revenue of $550 million to $600 million in the fourth quarter, along with an operating loss of $215 million to $235 million.
3Com didn't adjust its loss-per-share estimate. Analysts surveyed by Thomson Financial/First Call had expected 3Com to report a loss of 45 cents a share.
Meanwhile, 3Com said it will continue to produce business DSL routers and modems for small business and enterprise customers.
"There is an industry-wide glut of consumer cable and DSL modems that has driven down prices and margins," 3Com said. The company had indicated late last year that it was thinking about getting out of the consumer-modem business.
The company, which has been hit hard by the sharp decline in spending in telecommunications gear, in April reorganized into three more independent business units, focusing on networking cards for computers, networking gear for businesses and switching gear for telecom carriers.
3Com had already scaled back the high-speed modem division, discontinued its Audrey stand-alone Internet appliance and its Kerbango Internet radio and spun off its Palm hand-held computer unit to focus on networking equipment. The company has undertaken extensive cost cuts to help meet its goal of paring down annual operating costs by $1 billion and restoring profitability. Moves have included laying off more than 3,000 employees. |
