Jim Christie
SAN FRANCISCO: Network equipment maker 3Com Corp. on Tuesday posted a sharply
narrower fourth-quarter loss through cost-cutting even as revenues dropped by
more than 25 per cent.
Shares in the company rose 11 per cent in after-hours trade from the Nasdaq
close even as 3Com forecast that current quarter sales would decline up to 10
per cent further, making more cost-cutting and layoffs necessary.
"Most carriers today have cut and continue to cut," 3Com chief
executive Bruce Claflin told Reuters. "There's relatively little
investment." 3Com lost $23.8 million, or 7 cents per share, in its fourth
quarter ended May 31, compared with a loss of $517.7 million, or $1.52 per
share, a year earlier.
Revenues were $339 million, compared with $468 million a year earlier.
Excluding charges, 3Com reported operating income of $12.8 million, or 4 cents
per share, compared with a loss excluding charges of $206.3 million, or 61 cents
per share a year earlier.
Wall Street analysts had, on average, expected a loss excluding charges of 2
cents per share, with individual estimates in a range of nil to a loss of 4
cents per share, on revenues of $341.7 million, according to research firm
Thomson First Call.
3Com forecast revenues for its current fiscal first quarter would decline in
a range of 5 per cent to 10 per cent from the fourth quarter, and a
first-quarter loss excluding charges in a range of 3 cents to 6 cents per share.
Claflin said he did not believe the carrier and Internet service provider market
will improve in any "meaningful" way over the course of the company's
new fiscal year.
Looking to corporate clients
While revenue from telecom carriers and service providers would follow their
declining spending, sales to "enterprise" corporate customers should
grow, 3Com said.
Sales by 3Com's Business Networks Company rose to $196 million in the fourth
quarter from $191.5 million in the third quarter. "It's still a very
difficult market environment, but not a dead market environment," Claflin
said of the expected growth in sales to businesses.
Claflin said 3Com will go after the enterprise market in a more efficient
manner by combining two units, resulting in an unspecified number of job cuts,
and outsourcing some operations. "We're going to continue to drive down
costs regardless of market conditions," Claflin said. "That's a core
part of our strategy going forward."
Like other makers of equipment used by corporations, telecom carriers and
service providers to direct and manage online traffic, 3Com has been struggling
with a collapse in demand. 3Com in March said it would not look to its sales
growth to restore profitability, but would practice "disciplined cost and
expense management."
At the time, the Ethernet networking standard pioneer and former parent
company of handheld device maker Palm Inc. said there were signs that sales of
corporate network equipment -- its major business line -- were bottoming and the
company was progressing toward a goal of profitability before charges in the
fourth quarter.
3Com on Tuesday also reported the appointment of Mark Slaven as the company's
new chief financial officer, replacing Mike Rescoe, who the company said is
stepping down for personal reasons but would continue to work as an adviser to
Claflin.
(C) Reuters Limited.