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3Com reports losses and hints at job cuts

Plans to create telecoms subsidiary

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Network equipment manufacturer 3Com announced it will create a separate telecoms subsidiary, as it revealed smaller than expected second quarter losses yesterday.

3Com reported total revenues for the quarter of $789.5 million, and net losses of $52.4 million which compares to a loss of $41.3 million in the previous quarter. These losses were lower than those forecast in a profits warning earlier this month, but are still expected to result in unspecified job losses.

In common with many networking vendors, 3Com has been hit by a slowdown in demand in the telecoms sector largely caused by reorganisation affecting US carriers which have disrupted purchasing cycles. Because of this, and because of consolidation amongst smaller carriers, 3Com's carrier networking business in the second fiscal quarter declined 43 per cent to $95.4 million compared to $167.2 million in the prior quarter.

To improve its performance in the service provider market, 3Com said it is forming a telecoms subsidiary, called CommWorks Corporation. 3Com said it expects to save $200 million to $250 million a year through the restructuring but is staying mum on whether CommWorks might eventually be spun off or sold.

Commercial sales were in line with expectations but disappointing sales of broadband modems affected the performance of 3Com's consumer business. Second quarter sales of 3Com's commercial and consumer networking business were $671.3 million, up five percent.

Year 2000 has been a eventfal year for 3Com with the spin off of its fast-growing Palm personal organiser business in July and its exit from its core enterprise networking market, amid much anger for network managers and partners, in March. ®

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