More: 3Com Quarterly Profits Top Analyst Expectations
Reuters - Tuesday December 22 7:38 PM ET
PALO ALTO, Calif. (Reuters) - Quarterly profits posted by 3Com Corp.,
the No. 2 computer networking maker, sailed past Wall Street
forecasts on the strength of brisk worldwide sales of new
products, particularly in Western Europe.
The company Tuesday said profit before a charge for the second quarter
ended Nov. 27 rose to $133.4 million, or 36 cents a share, from
profits of $86.7 million, or 24 cents, in the year-ago period. Revenue
surged 29 percent to $1.54 billion from $1.19 billion in the year-ago
period.
Buoyed by new products, the largest maker of computer modems and
of the Palm handheld organizer also surged past the so-called whisper
number -- circulated among traders -- of 33 cents to 34 cents a share.
The consensus estimate in First Call Corp. survey of analysts was for
earnings of 31 cents a share.
''This was just a stellar quarter,'' said Michael Cristinziano, an
analyst at Gerard Klauer Mattison in New York, who rates shares of
3Com as a ''buy.'' ''The stock should react positively.''
Western Europe was the star performer during the quarter as revenues
outside the United States surged by 38 percent to $698.7 million
while U.S. revenues rose 22 percent to $841.8 million.
''By any measurement, we're doing much better,'' said Bruce Claflin,
3Com's president and chief operating officer in a telephone interview.
The news sent 3Com stock, which has nearly doubled since October, as
high as $50 in after-hours trading. In regular trading on the Nasdaq,
3Com rose $1.50 to $48.63. The stock has rallied, analysts said, amid
a comeback in technology stocks and as 3Com has ironed out the last
of its difficulties in acquiring US Robotics, which it bought last year.
Excluding charges, 3Com's net income rose to $132.9 million, or 36 cents
a share, from $93.7 million, or 26 cents, in the year-ago period. In
the most recent quarter, 3Com took a $600,000 merger-related charge.
Profits rose as the Santa Clara, Calif.-based company boosted sales of
modems, network interface cards, or NICs, which connect PCs and other
gear that connects computers in networks.
The company also told analysts on a conference call that it planned
to boost spending on research and development to gain an early foothold
in emerging markets such as home networking, voice over the Internet
and cable modems.
Eric Benhamou, 3Com's chairman and chief executive, told analysts on
the call that products rolled out less than a year ago accounted for
60 percent of its total revenue, an all-time high. It was also the
first quarter that it closed more than 100 deals each with a value
of over $500,000.
Even so, 3Com executives cautioned that its third quarter -- running
from December through February -- is historically the slowest of the
year. It advised analysts that revenue would likely be down slightly
or flat with the second quarter.
''The third quarter will be our toughest to get sequential revenue
growth,'' Chris Paisley, 3Com's chief financial officer, said on the
conference call.
The No. 1 networking company, Cisco Systems Inc. (Nasdaq:CSCO - news),
as well as Ascend Communications Inc. (Nasdaq:ASND - news), 3Com and
telephone equipment companies such as Lucent Technologies Inc.
(NYSE:LU - news) are all racing to develop and sell gear that moves
traditional phone networks onto the digital networks used by computers.
It is less costly and more efficient to turn voice into digital
packets and shunt them over data networks rather than use old-world
circuit-switched based networks now used to carry telephone calls.
''The trend toward convergence of voice and video traffic into data
networks is undeniable,'' Benhamou said during the conference call.
''This is truly a fundamental change to our industry.''
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