3COM CONFIRMS FINANCIAL RESULTS FOR SECOND QUARTER
SANTA CLARA, Calif.--(BUSINESS WIRE)--Dec. 18, 1997--3Com Corporation
(Nasdaq:COMS) today reported financial results for its second fiscal quarter, ended November
30, 1997.
For the quarter, net income was $15.1 million, or $0.04 per share on sales of $1.2 billion. These
results were consistent with the Company's expectations announced on December 2. Sales of
systems products, including switches, hubs, internetworking and remote access products, were
$621.5 million or 51% of total sales. Client access products, which include network interface
cards and modems were $598.8 million or 49% of sales. "As we enter the second half of the
fiscal year, 3Com continues efforts to improve channel inventory measurement systems,
transition our product lines to next generation platforms and leverage our market strength across
enterprise, carrier, small business and consumer markets," said Eric Benhamou, chairman and
chief executive officer. "We are extremely well positioned to help our customers worldwide
both enhance the performance of their current networks and leverage the power of integrated
voice, video and data networks."
During the quarter 3Com continued to drive the transition to next generation networks with the
introduction of several important products and partnerships. These products include the
CoreBuilder(TM) 9000 Enterprise Switch, which along with the award-winning CoreBuilder
3500 Layer 3 Switch, leverage 3Com's FIRE (Flexible Intelligent Routing Engine) technology
and offer the industry's highest levels of performance, capacity and control required for the core
of enterprise networks. The CoreBuilder 9000 platform supports both cell-based ATM and
packet-based Gigabit Ethernet switching in a single platform and can be configured to support a
variety of technologies to meet customers' diverse high-speed switching requirements. In
addition, the Company announced a series of enhancements for the CoreBuilder 5000 and
CoreBuilder 7000 High-Function Switches including new TranscendWare(TM) software that
boosts network capacity and control. These enhancements enable customers to protect existing
investments from shared 10 Mbps through switched multi-gigabit, multi-technology networks.
3Com also introduced new price-leading SuperStack(R) II workgroup solutions and the
SuperStack II Remote Access 3000 family of remote access concentrators, OfficeConnect(R)
products for the small office, and Megahertz(R) 56Kbps x2(TM) and 33.6 Kbps International
PC Card Modems. Finally, 3Com unveiled the industry's broadest Virtual Private Network
(VPN) systems roadmap which reduces end-user telecommunications costs by as much as 50
percent and is the foundation for next generation wide area and remote access corporate
networks. Partnerships announced during the quarter include a collaboration with Siemens and
Newbridge to deliver the industry's first standards-based, end-to-end solution that enables
carriers to provide differentiated Internet Protocol (IP) networking services to enterprise
customers through Carrier Scale Internetworking (CSI) architecture. 3Com will implement CSI
capabilities into its broad family of enterprise wide area network (WAN) access and service
provider point-of-presence products. Additionally, 3Com formed an alliance with Motorola and
PageMart Wireless, Inc. to bring wireless messaging to a broad range of consumers and
business markets in the form of the Pager Card for the PalmPilot(TM) connected organizer.
In December, 3Com announced that its ongoing support of the International
Telecommunications Union (ITU) standard for 56K technology resulted in a compromise that
will likely result in the determination of a standard in January 1998. This should enable the
company to ship its first industry standard compatible 56K solution in the first calendar quarter
of 1998. The foregoing information regarding modem standards and availability of compliant
products is forward-looking, and actual dates could differ materially. Among the factors that
could affect those dates are the following: delays in ITU adoption of the proposed standard;
delays in modifying current x2-based products to comply with the new standard or in ramping up
manufacturing of such compliant products. For a more detailed discussion of these and other
risk factors, interested parties should review the company's SEC reports, including 3Com's Form
10-K for the year ended May 31, 1997 and 10-Q for the quarter ended August 31, 1997, and
U.S. Robotics' Form 10-Q for the quarter ended March 30, 1997, and the Joint Proxy
Statement/Prospectus dated May 8, 1997.
3Com Corporation enables individuals and organizations worldwide to communicate and share
information and resources at anytime from anywhere. As one of the world's preeminent
suppliers of data, voice and video communications technology, 3Com has delivered networking
solutions to more than 100 million customers worldwide. The company provides enterprises,
network service providers and carriers, small businesses and consumers with comprehensive,
innovative information access products and system solutions for building intelligent, reliable and
high performance local and wide area networks. For further information, visit 3Com's World
Wide Web site at 3com.com, or the press site at 3com.com.
NOTE TO EDITORS: 3Com, SuperStack, OfficeConnect, Megahertz and U.S. Robotics are
registered trademarks and CoreBuilder, TranscendWare, x2, and PalmPilot are trademarks of
3Com Corporation or its subsidiaries. All other trademarks are property of their respective
holders.
3Com Corporation
Consolidated Statements of Operations
(Unaudited. In thousands, except per share data.)
Quarter Ended Six Months Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1997 1996 1997 1996
Sales $1,220,253 $1,421,660 $2,821,115 $2,671,720
Cost of sales 651,094 739,181 1,483,902 1,397,385
Gross margin 569,159 682,479 1,337,213 1,274,335
Operating expenses:
Sales and
marketing 337,594 245,910 638,901 453,118
Research
and development 145,491 109,287 287,608 209,052
General and
administrative 70,507 55,640 133,096 103,282
Purchased
in-process
technology -- 54,000 -- 54,000
Merger-related
charges -- 6,600 426,000 6,600
Total operating
expenses 553,592 471,437 1,485,605 826,052
Operating
income (loss) 15,567 211,042 (148,392) 448,283
Other income - net 7,637 4,133 10,598 7,106
Income (loss) before
income taxes 23,204 215,175 (137,794) 455,389
Income tax
provision (benefit) 8,121 99,480 (6,057) 187,730
Net income
(loss) $15,083 $115,695 $(131,737) $267,659
Net income
(loss) per share
Primary $0.04 $0.33 $(0.37) $0.76
Fully-diluted $0.04 $0.33 $(0.37) $0.76
Shares used in
computing per
share amount:
Primary 365,085 353,657 353,529 352,814
Fully-diluted 365,105 355,158 353,539 353,772
Net income for the quarter ended November 30, 1996 included a charge
of approximately $54.0 million ($0.15 per share) for purchased in
process technology associated with U.S. Robotics Inc. (U.S.
Robotics) acquisition of Scorpio Communications Ltd. (Scorpio), and
a charge of approximately $6.6 million ($0.02 per share) for merger
costs associated with 3Com's acquisition of OnStream Networks, Inc.
(OnStream). Excluding these charges, pro forma net income for the
quarter ended November 30, 1996 was $176.3 million ($0.50 per share).
Net loss for the six months ended November 30, 1997 included a
pre-tax charge of approximately $426.0 million ($0.88 per share)
associated with the merger with U.S. Robotics. Excluding this
charge, pro forma net income was $187.3 million ($0.52 per share).
Fully diluted shares used in computing pro forma net income for the
six months ended November 30, 1997 were 363,085. Net income for the
six months ended November 30, 1996 included a charge of approximately
$54.0 million ($0.15 per share) for purchased in-process technology
associated with U.S. Robotics' acquisition of Scorpio and a charge
of approximately $6.6 million ($0.02 per share) for merger costs
associated with 3Com's acquisition of OnStream. Excluding these
charges, pro forma net income for the six months ended November 30,
1996 was $328.3 million ($0.93 per share).
3Com Corporation
Consolidated Balance Sheets
(Unaudited. In thousands.)
Nov. 30, 1997 May 31, 1997
ASSETS
Current Assets:
Cash, cash equivalents
& temporary cash investments $1,135,810 $939,831
Trade receivables 927,504 1,234,227
Inventories 628,974 402,356
Deferred income taxes 297,121 165,731
Other 111,289 94,419
Total current assets 3,100,698 2,836,564
Property and equipment - net 678,426 660,025
Deposits and other assets 80,093 112,644
Total $3,859,217 $3,609,233
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $110,000 $60,700
Accounts payable 327,862 345,304
Accrued and other liabilities 878,944 477,393
Income taxes payable -- 189,399
Total current liabilities 1,316,806 1,072,796
Long-term debt 41,548 162,515
Other long-term obligations 5,169 7,942
Deferred income taxes 60,685 25,858
Stockholders Equity:
Common stock 1,564,586 1,178,359
Unamortized restricted
stock grants (4,912) (5,165)
Retained earnings 876,303 1,168,941
Unrealized gain on
available-for-sale securities 536 2,320
Accumulated translation
adjustments (1,504) (4,333)
Total stockholders' equity 2,435,009 2,340,122
Total $3,859,217 $3,609,233
Note to editors/analysts: For comparative purposes, the following
schedules are statements of income for 3Com Corporation for the
12-month period ending November 30, 1997 and November 30, 1996.
3Com Corporation
Consolidated Statements of Income
(Unaudited. In thousands, except per share data.)
Twelve Months Ended
Nov. 30, 1997 Nov. 30, 1996
Sales $5,753,541 $5,079,272
Cost of sales 2,992,746 2,690,612
Gross margin 2,760,795 2,388,660
Operating expenses:
Sales and marketing 1,200,001 853,250
Research and development 552,889 390,743
General and administrative 250,892 194,240
Purchased in-process
technology -- 160,353
Merger-related charges
and other 426,000 7,550
Total operating expenses 2,429,782 1,606,136
Operating income 331,013 782,524
Other income - net 20,487 10,097
Income before income taxes 351,500 792,621
Income tax provision 153,273 348,022
Net income $198,227 $444,599
Net income per share:
Primary $0.56 $1.27
Fully-diluted $0.56 $1.27
Shares used in computing per
share amount:
Primary 353,920 349,514
Fully-diluted 354,397 350,438
Net income for the twelve months ended November 30, 1997 included a
pre-tax charge of approximately $426.0 million ($0.88 per share)
associated with the merger with U.S. Robotics and a tax benefit of
approximately $17.9 million ($0.05 per share) related to U.S.
Robotics' acquisition of Scorpio Communications Ltd. (Scorpio).
Excluding the charge and benefit, pro forma net income was $499.3
million ($1.39 per share). Net income for the twelve months ended
November 30, 1996 included purchased technology charges of
approximately $160.4 million ($0.46 per share) related to U.S.
Robotics' acquisition of Scorpio and 3Com's acquisition of AXON
Networks, Inc., merger-related charges and other of approximately
$7.6 million ($0.02 per share) associated with 3Com's acquisition of
OnStream Networks, Inc., and a litigation settlement. Excluding
these charges, net income was $612.2 million ($1.75 per share).
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