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3Com misses targets but narrows losses
Friday, September 20 2002
by Ciaran Buckley


3Com continues to batten down the hatches by slashing costs, after the networking
hardware manufacturer failed to meet Wall Street's Q1 expectations. 



The company said on Thursday that during its first fiscal quarter, operating
expenses were reduced by USD172 million, from USD187 million in the previous
quarter. 3Com had operating expenses of USD307 million in the first quarter of
last year.  The company said it had revenues of USD305 million for Q1, down
from USD339 million in previous quarter and USD390 million at this time last
year, as the market for its products continues to languish. 





3Com's net loss in its most recent three month period amounted to USD31 million,
which included a restructuring charge of USD23 million and a write-down charge of
USD2.4 million for amortisation and intangibles. The losses are a vast
improvement on the USD232 million that the business lost at the same quarter last
year. 





Importantly, the firm missed Wall Street's consensus on losses per share of
USD0.03, posting losses of USD0.09. Still, Thursday's losses were a vast
improvement from last year's figure of USD0.67 in the first quarter of 2001. 
3Com President and Chief Executive Officer Bruce Claflin attributed the improving
financial results primarily to cost reductions. "We are wringing unnecessary
cost out of our company in every area in which we do business," Claflin said in
a statement. 



Claflin also said that 3Com was moving much of its basic engineering activities
to low cost countries such as India and China. Additionally the company is
outsourcing a number of cost and capital-intensive activities such as
manufacturing and IT infrastructure. 



Looking forward, the business said it expects total revenues to decline in the
next quarter by between 5 percent and 8 percent, driven by another substantial
decline in its connectivity segment sales. 3Com expects the revenues from its
enterprise networking segment to increase modestly while sales for its CommWorks
division are expected to be flat.





In Ireland, 3Com employs 900 in its manufacturing facility in Blanchardstown. The
numbers employed in Blanchardstown have been constant over the past year
according to a company spokesperson. However on a global level, 3Com cut its
worldwide last year from 12,000 to 5,500 in 2001, cuts which included around 100
layoffs in Ireland.