3Com Losses Still High

By Matthew Hicks  |  Posted 2002-03-21 Print this article Print

The financial scene at networking company 3Com may be a little brighter than it was a year ago, but it is still in the red. CEO Claflin can't say if 3Com can reach a Q4 profitability goal.

3Com Corp. late Thursday reported a net loss for its fiscal third quarter that was slightly lower than the loss in the same quarter last year but double that of the second fiscal quarter of this year. The Santa Clara, Calif., networking company lost $236.1 million, or 67 cents a share, in the quarter ended March 1. That was 4 percent less than the loss in the third quarter of fiscal year 2001 but more than double the $103.7 million loss a quarter earlier. Sales dropped to $356 million for the quarter, down 9.6 percent from one quarter ago. On a pro forma basis, excluding such costs as restructuring charges and the amortization of intangible assets, the Q3 FY2002 net loss was $42.3 million, or 12 cents a share. The per-share loss was 4 cents better than the First Call consen-sus of analysts of 16 cents.
"For the near term we do not look to improving market conditions to restore profitability," said Bruce Claflin, 3Com president and CEO, in a conference call. "Rather, it will be through disciplined cost and expense management."
3Com had set the fourth quarter of this year as a target for returning to profitability, at least on a pro forma basis. Claflin said that while the company is taking step to reach the goal he couldnt guarantee that it will be achieved because of market conditions. Signs of an economic recovery are less clear in the tech sector and networking, he said. There was a bright spot on the enterprise side of 3 Coms business, its Business Networks Company. It contributed $2.7 million in the third quarter to 3Coms overall margins, the only one of its three units with a positive contribution. Sales in that unit, though, were down 1.5 percent from a quarter earlier to $191.5 million. 3Com in recent months has made a renewed push for higher-end enterprise business, announcing a series of new switches and LAN management software. Claflin also said that no more mass layoffs, which have marked 3Coms restructuring efforts over the past year, are planned for the next quarter. The company is expecting to cut as many as 100 more employees as part of other cost-cutting measures in the next quarter, said CFO Michael Rescoe, but those job cuts will be in targeted parts of the business. Earlier this month, 3Com laid off 550 employees in its Business Connectivity Company unit, and that announce-ment was in addition to a series of layoffs across the company that had begun a year earlier and left thousands of employ-ees jobless. 3Com, which once had 12,500 employees, finished the third quarter with 5,500 employees.
Matthew Hicks As an online reporter for eWEEK.com, Matt Hicks covers the fast-changing developments in Internet technologies. His coverage includes the growing field of Web conferencing software and services. With eight years as a business and technology journalist, Matt has gained insight into the market strategies of IT vendors as well as the needs of enterprise IT managers. He joined Ziff Davis in 1999 as a staff writer for the former Strategies section of eWEEK, where he wrote in-depth features about corporate strategies for e-business and enterprise software. In 2002, he moved to the News department at the magazine as a senior writer specializing in coverage of database software and enterprise networking. Later that year Matt started a yearlong fellowship in Washington, DC, after being awarded an American Political Science Association Congressional Fellowship for Journalist. As a fellow, he spent nine months working on policy issues, including technology policy, in for a Member of the U.S. House of Representatives. He rejoined Ziff Davis in August 2003 as a reporter dedicated to online coverage for eWEEK.com. Along with Web conferencing, he follows search engines, Web browsers, speech technology and the Internet domain-naming system.

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