3Com Confirms Third Fiscal Quarter Results; Sales of
$1.41 Billion Increase 13 Percent Year-Over-Year
SANTA CLARA, Calif.--(BUSINESS WIRE)--March 23,
1999--3Com Corporation (Nasdaq: COMS) today reported financial
results for its third fiscal quarter, ended Feb. 26. Sales for the
quarter of $1.411 billion increased 13 percent from sales of $1.250
billion reported in the same quarter a year ago. Pro forma net
income was $89.6 million, or $0.24 per share, compared with pro
forma net income of $7.4 million, or $0.02 per share, posted in the
year-ago quarter. These results were consistent with the Company's
preliminary earnings announcement on March 2.
Reported third quarter net income of $89.7 million, or $0.24 per
share, included a net pre-tax credit of $7.3 million related to changes
in previously recorded merger and restructuring expenses and a net
pre-tax charge of $7.1 million for purchased in-process technology
associated with the acquisitions of Smartcode Technologie and
certain assets of ICS Networking, Inc. Reported net income in the
same quarter a year ago of $13.9 million, or $0.04 per share,
included a net pre-tax credit of approximately $9.9 million related to
the merger charge associated with the company's acquisition of
U.S. Robotics, Inc. in June 1997.
Third quarter sales of systems products increased 28 percent from
the same quarter a year ago to $703.9 million and comprised 50
percent of total sales. Client access product sales increased one
percent from the year-ago quarter to $706.6 million and comprised
50 percent of total sales.
"Balance sheet performance remained strong and improved during
the quarter, enabling us to preserve gross margins despite the impact
of seasonality and an unexpected slowdown in end-user demand in
the North and Latin American enterprise markets," said Eric
Benhamou, chairman and chief executive officer.
During the quarter, the company announced a series of significant
alliances, acquisitions and new products that strengthen its ability to
deploy converged networking solutions across four key customer
markets-consumer, small-medium enterprise, large enterprise and
carrier/ISPs. For a comprehensive review of these announcements
and other company news, please refer to the "Q399 Highlights"
attachment at 3com.com. About 3Com
Corporation
With more than 200 million customers worldwide, 3Com
Corporation connects more people to information in more ways than
any other networking company. 3Com delivers innovative
information access products and network system solutions to large,
medium and small enterprises; carriers and network service
providers; PC OEMs; and consumers. 3Com -- More
connected.(TM) For further information, visit 3Com's World Wide
Web site at www.3com.com or the press site at
3com.com.
Note to Editors: 3Com is a registered trademark and More connected
is a trademark of 3Com Corporation.
3Com Corporation
Condensed Consolidated Statements of Operations
(Unaudited. In thousands, except per share data.)
Three Months Ended Nine Months Ended
Feb. 26, Mar. 1, Feb. 26, Mar. 1,
1999 1998 1999 1999
Sales $ 1,410,529 $ 1,250,191 $ 4,356,577 $ 4,044,896
Cost of sales 743,019 707,188 2,336,297 2,183,961
----------- ----------- ----------- -----------
Gross margin 667,510 543,003 2,020,280 1,860,935
----------- ----------- ----------- -----------
Operating expenses:
Sales and
marketing 324,711 315,174 949,982 955,886
Research and
development 162,114 144,237 468,706 432,013
General and
administrative 69,157 67,775 193,151 201,905
Purchased
in-process
technology 7,115 -- 7,115 --
Merger-related
(credits) charges
and other (7,315) (9,926) (16,895) 258,632
----------- ----------- ----------- -----------
Total operating
expenses 555,782 517,260 1,602,059 1,848,436
----------- ----------- ----------- -----------
Operating income 111,728 25,743 418,221 12,499
Interest and other
income (expense),
net 18,100 (4,423) 40,019 6,175
----------- ----------- ----------- -----------
Income before
income taxes 129,828 21,320 458,240 18,674
Income tax provision 40,247 7,462 142,055 52,028
Equity interest in
loss of consolidated
joint venture (156) -- (156) --
----------- ----------- ----------- -----------
Net income (loss) $ 89,737 $ 13,858 $ 316,341 $ (33,354)
=========== =========== =========== ===========
Net income (loss)
per share:
Basic $ 0.25 $ 0.04 $ 0.88 $ (0.10)
Diluted $ 0.24 $ 0.04 $ 0.86 $ (0.10)
Shares used in
computing per
share amounts:
Basic 361,766 354,766 359,534 349,028
Diluted 374,699 366,116 369,777 349,028
Net income for the quarter ended February 26, 1999 included a net
pre-tax charge of approximately $7.1 million for purchased
in-process technology associated with the purchases of Smartcode
Technologie and certain assets of ICS Networking, Inc., and a net
pre-tax credit of approximately $7.3 million primarily associated
with the merger with U.S. Robotics, Inc. (US Robotics). Excluding
these charges and credits, net income for the quarter ended February
26, 1999 would have been $89.6 million, or $0.24 per share.
Net income for the nine months ended February 26, 1999 included a
net pre-tax charge of approximately $7.1 million for purchased
in-process technology associated with the purchases of Smartcode
Technologie and certain assets of ICS Networking, Inc., and a net
pre-tax credit of approximately $16.9 million primarily associated
with the merger with U.S. Robotics. Excluding these charges and
credits, net income for the nine months ended February 26, 1999
would have been $309.7 million, or $0.84 per share.
Net income for the quarter ended March 1, 1998 included a net
pre-tax credit of approximately $9.9 million associated with the
merger with U.S. Robotics. Excluding this net pre-tax credit, net
income for the quarter ended March 1, 1998 would have been $7.4
million, or $0.02 per share.
Net income for the nine months ended March 1, 1998 included a net
pre-tax charge of approximately $258.6 million associated with the
merger with U.S. Robotics. Excluding this charge, net income for
the nine months ended March 1, 1998 would have been $180.2
million, or $0.49 per share.
3Com Corporation
Condensed Consolidated Balance Sheets
(In thousands.)
Feb. 26, May 31,
1999 1998
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 981,520 $ 528,981
Short-term investments 742,726 547,097
Accounts receivable, net 981,017 849,640
Inventories, net 409,216 644,771
Deferred income taxes 368,738 430,182
Other 99,420 134,001
----------- -----------
Total current assets 3,582,637 3,134,672
Property and equipment, net 837,316 858,779
Deposits and other assets 144,412 87,069
----------- -----------
Total assets $ 4,564,365 $ 4,080,520
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 366,009 $ 332,992
Accrued liabilities and other 670,462 673,311
Income taxes payable 171,645 177,612
----------- -----------
Total current liabilities 1,208,116 1,183,915
Long-term debt 30,442 35,878
Deferred income taxes and other
long-term obligations 59,515 53,232
Equity interest in consolidated
joint venture 5,093 --
Stockholders' equity:
Common stock 1,934,004 1,730,676
Retained earnings 1,334,322 1,079,775
Unrealized (loss) gain on
investments, net (946) 827
Unamortized restricted stock grants (5,185) (4,157)
Accumulated translation adjustments (996) 374
----------- -----------
Total stockholders' equity 3,261,199 2,807,495
----------- -----------
Total liabilities and stockholders'
equity $ 4,564,365 $ 4,080,520
=========== ===========
CONTACT: 3Com Investor Relations
Shirley Stacy, 408/326-6301
Shirley_Stacy@3Com.com
or
3Com Public Relations
Leslie Davis, 408/326-7187
Leslie_Davis@3Com.com
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