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3Com restructure zaps Q4 profits, sales

And it won't be back in the black before this time next year

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Comms giant 3Com yesterday saw its sales plummet and profitability go out of the window thanks to the company's major reorganisation following its exit from the high-end router and low-end modem markets.

The company also warned that its return to profitability won't happen as soon as it had previously predicted. Don't expect net income until Q4 2001, 3Com warned, having earlier earmarked Q3 as its target.

3Com's fourth quarter of fiscal 2000 saw a loss of $146.8 million on sales of $763.7 million. During the same period last year, 3Com made a profit of $87.5 million on sales of $1.24 billion. For the previous 2000 quarter, 3Com recorded net income of $97.4 million on sales of $1.42 billion.

The Q4 2000 loss comes in at 42 cents a share, a little better than the 44 cents a share Wall Street had been expecting, according to First Call averages.

The big hit on 3Com's income comes from the quarter's reorganisation, which the company expects to be completed by the end of Q1 2001. At that point its will have dealt with its restructure-derived expenses - including the cost of $200-300 million for the loss of 800-1000 jobs - and it can get back on track building up its profitable business, such as home networking and high-speed Net access devices, and de-emphasising older, mature operations, such as network interface cards.

3Com expects Q1 2001 to show sales of $775-825 million - an improvement on Q4 2000 - and an operating loss of $210-240 million, down from Q4's operating loss of $340 million, itself rather lower tham the $450-500 million operating loss the company predicted when it announced the restructure. Restucture-related expenses for Q1 2001 should total $80 million.

Sales were down in part because of the high-end businesses 3Com is ridding itself of, but also because it no longer has all those lovely Palm sales to pad out the books. 3Com will give away its remaining 94 per cent stake in Palm on 27 July. ®

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