3Com Lowers Q1 Revenue Forecast

The company warns investors that it will not meet earlier predictions for expected revenues and gross margins.

3Com Corp. on Friday warned investors that it will not meet expected revenues and gross margins that it had predicted in June during its fourth fiscal earnings report.

The Marlborough, Mass., company had expected to see revenues of $183 million for its first fiscal 2005 quarter, ending August 27, but said it now expects to see revenues of between $160 and $164 million. In addition, gross margins are now expected to fall between 38 and 39 percent, instead of 40 percent as indicated in June.

3Com officials would not comment on the news, opting instead to wait until the company formally announces its first fiscal quarter earnings on September 16.

Wall Street analysts following 3Com attribute the change primarily to the departure of three high-level executives from 3Com. "We feel the shortfall was at least partially attributed to the recent departure of senior management members," said Jiong Shao, an analyst with Lehman Bros. "They lost their CFO, COO and head of America sales. When things like that happen, you will see short-term disruption," he added.

3Com Chief Financial Officer Mark Slaven, Chief Operating Officer Dennis Connors and Neal Oristano, vice president of sales for America, all opted to leave the company rather than move to corporate headquarters, which was relocated from Santa Clara, Calif., to Marlborough a year ago. Slaven and Connors had been commuting from their homes in Texas and North Carolina, respectively.

3Com named Donald Halsted to replace Slaven as CFO. 3Com has not yet named a new COO to replace Connors.

Along with the senior management disruption, Shao attributed the shortfall to weakness in 3Coms core stackable Ethernet switch business. The companys joint venture with Huawei also failed to make up the difference, he added.


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