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Revenues up for loss-making 3Com

H3C venture spurs reversal of fortunes

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3Com has reported a second-quarter net loss of $4m for its second fiscal quarter.

This equates to $00.1 per share during the quarter, down from $11m or $0.03 per share a year ago.

The network equipment manufacturer said on Wednesday that revenue for the three-month period ended 1 December was $333m, an 81 per cent increase compared to the same quarter last year.

The company attributed the dramatic rise in revenue to the inclusion of the revenue of its joint venture Huawei-3Com (H3C). Excluding the impact of the deal, 3Com's revenues rose 18 per cent during the quarter.

Last month, 3Com announced it had agreed to buy Huawei Technologies' 49 per cent stake in H3C for $882m. H3C is a Chinese joint venture which was originally established by 3Com and Huawei in November 2003.

3Com's gross profit for the second quarter of fiscal 2007 was $150m, or 45 per cent of revenue, up five per cent year-on-year.

Operating expenses were $160m, which included a $27m reduction in expenses for the firm's Secure, Converged Networking (SCN) segment. This led to an operating loss of $9m compared to $42m for the same three-month period last year.

Second quarter non-GAAP operating income was $10m, a $40m improvement compared to the prior-year quarter's non-GAAP operating loss of $30m.

"In our second fiscal quarter, we continued to show excellent progress in both the H3C and SCN operating segments of our business, delivering on one of our key milestones - non-GAAP operating profitability," 3Com president and chief executive Edgar Masri said.

"Companies that will be successful on a global scale must find new and innovative ways to tap into fast growing economies such as the one in China and other emerging markets. Through H3C and our improving SCN segment, we believe we have the building blocks necessary to create a global technology leader. We must now focus on successfully integrating the best-in-class approaches from both H3C and 3Com to build on this positive momentum and create a sustainable, growing and profitable business." ®

Copyright © 2006, ENN

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