3Com losses grow
3Com's revenues have slipped again and losses have widened, partly due to restructuring moves.
The computer network equipment maker said that during its first fiscal quarter, net loss amounted to $106 million, or $0.29 per share, figures which include a big $48.6 million charge for restructuring. Last year, net losses came to $97.6 million, or $0.27 per share.
Last week, 3Com formally announced plans to cut 1,000 jobs globally, including about 650 in Dublin, where a manufacturing plant will be closed and production will be shifted to partners in Asia and the US. The company said all of the moves should be completed in the next six months. Earlier in the year the company cut 200 of 3,300 workers.
In part, the erosion of 3Com's revenues over the last several quarters has forced the re-organisation, and during the most recent three months to 29 August, sales amounted to $162 million, down from $175 million in the previous quarter, though slightly ahead of Wall Street's predictions. Last year, 3Com reported revenues of $269.2 million in its fiscal first quarter. Revenues in Europe for the most recent quarter fell 13 per cent from the previous quarter, and 5 per cent in the Americas, but sales were flat in Asia.
Looking forward, 3Com did not offer specific financial guidance but said that sales of certain mobile and server connectivity products would be down in the current quarter. Inventory is expected to remain at or below the current level of 4.5 weeks during the second fiscal quarter and operating expenses should decline slightly through Q3, but the big drop-off in costs will come in the fourth quarter, when the full effects of the restructuring are realised. The company said cashflow breakeven should come in Q4 but it anticipated a negative cashflow of $50 million for the full year.
"The industry outlook, after a prolonged downturn, is beginning to show signs of growth and we are seeing increased customer interest in our products and solutions," said 3Com chief executive Bruce Claflin. "While it would be premature to suggest an industry or company turnaround, we are encouraged and look forward to describing our plans in more detail both on next quarter's earnings call but also during our investor day to be held in New York City in January."
Other important updates in the results included news on the company's joint venture with Huawei Technologies, which has been approved by local officials in China but not by central government officials. The company said the venture would be operational in November and it will soon begin making routers, following the launch of a modular switch earlier this year. Analysts have said they are sceptical about the potential of the venture.
3Com is in the process of moving its headquarters from Santa Clara, California, to Marlborough, Massachusetts.
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