Palm keeps 3Com in profit during Q2

Network, comms product sales down 12, 14 per cent - Palm sales up 77 per cent

Sales of Palm Computing handhelds held 3Com's profits up for its second quarter, keeping at bay the effects of serious decline in sales of the company's traditional comms and networking product lines.

3Com yesterday posted profits of $130.9 million, down on last year's $133.4 million. Take into account the sale of investment stocks a ($71.3 million) and other special items (including a $5.9 million "corporate realignment" charge), and the figure rises to $177.3 million.

Sales for the period fell four per cent to $1.475 billion, pulled down by a 12 per cent decline in sales of hubs, routers and switches, and a 14 per cent decline in modem sales. 3Com blames the shortfalls on companies spending their money on Y2K fixes instead. Network product sales totalled $593.2 million; modems accounted for $620.9 million. Sales of Palm machines rose a whopping 77 per cent year on year to $260.9 million, which is good news for investors waiting to buy stocks in the division when it's spun off next year.

Still, it shows that sales of handheld computers have some way to go to match comms and networking products. CEO Eric Benhamou's plan to improve the situation centres on a focus on emerging comms technologies, such as wireless networking, Internet telephony and Net access products. It's a shame such areas only account for around ten per cent of 3Com's revenues right now, but Benhamou has high hopes for them, he told Reuters. He is also continuing to cut costs and streamline 3Com's business, he said. CFO Chris Paisley predicted the company's Q3 profits would be "comparable to last year's as a seasonal downturn and more Y2K worries took their toll". ®

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