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3Com announces losses and wants to save $1bn

Ditches 'out-Palming Palm' Net appliance

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3Com has reported third quarter losses on reduced sales, and announced plans to ditch development of its consumer Net appliance product.

3com's revenues for the quarter ending 2 March were $629.6 million, down 18 per cent on the $766.7 million it reported in its previous quarter. Last year its revenue for Q3 was more than twice as much at $1.42 billion.

This fall in revenue has resulted in 3Com recording a pro forma net loss its third quarter of $122.8 million.

Like many networking firms, 3Com is blaming weak sales to service providers and an overall slowdown in the US economy for its disappointing financial results.

Other factors, such as a shift in demand to lower-margin commercial access products and eroding prices and margins for consumer modems, are also hitting 3Com financially.

In order to turn around its business, 3Com has announced a program of measures designed to achieve annual savings of $1 billion a year. Most of these savings will be achieved by scaling back its broadband modem business and discontinuing its consumer Internet Appliance product lines.

3Com's first Internet appliance, Audrey, was only introduced in October and was positioned by the firm as a device that would "out-Palm Palm".

Such plans are now no more and 3Com will instead concentrate on technologies such as wireless solutions, IP Telephony and Gigabit Ethernet which it sees as key to moving back to profitability.

As previously reported, last month 3Com said it would lay off 1,200 workers, or 10 per cent of its workforce when it revised its sales forecasts for the second time in three months.

In the run up to the announcement of the results, 3Com's MD for UK and Ireland, Adrian Hurel, left the firm for unspecified reasons. His job has been taken up by Paul Malcolm. ®

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