3Com Narrows Its Losses, But Sales Slide

3Com Corp., in its latest earnings released Tuesday, narrowed its losses but saw a continued slide in overall sales.

The Santa, Clara, Calif., networking vendor reported a net loss of $24 million, or 7 cents per share, for the fourth quarter ended May 31. That compares with a net loss of $518 million a year ago and a loss of $236 million a quarter ago.

"We exit the year in fundamentally better shape in almost every aspect from customer relations to financial performance and are well-positioned for the future," said Bruce Claflin, 3Coms president and CEO.

Along with its earnings, 3Com on Tuesday announced that its chief financial officer, Mike Rescoe, has stepped down from that position for personal reasons but will continue to advise Claflin. He has been replaced with Mark Slaven, who previously was a 3Com vice president and treasurer.

For the quarter, sales, at $339 million, were down 28 percent from the same quarter a year ago. Fiscal 2002 sales were $1.5 billion, nearly half the $2.8 billion in sales for fiscal 2001.

One bright spot in sales was in the Business Networks Co. division of 3Com, which makes enterprise LAN switches and telephony equipment. Sales were up 2 percent in the fourth quarter over the quarter before; sales for the companys service provider and network interface card-focused divisions, however, fell in the double digits.

On a pro forma basis, 3Com beat analysts expectations for a loss of 2 cents per share by recording a 4-cent-per-share profit.

Claflin said that 3Com is in "fundamentally better shape" than it was at the start of the fiscal year and is most optimistic about business in its enterprise switching business, where revenues in Layer 2 fixed switches grew 1 percent sequentially in the fourth quarter and revenues for Layer 3 fixed Gigabit switches jumped 16 percent.

"We intend to gain market share over the competition," Claflin said of the enterprise business. "We will do this by leveraging new technologies and by exploiting our increasingly competitive cost position."

The company continues to launch new enterprise products this year, including the introduction this week of a new Layer 3 LAN core switch to work with its much-touted XRN technology for interconnecting distributed core switches.