3Com posts third-quarter loss, plans to drop Internet appliance line

3Com Wednesday announced its third quarter financials, revealing revenue and income numbers that are down for the second consecutive quarter. Partly as a result, the company says it will dump its consumer Internet appliance business in order to cut costs.

3Com took in revenue of $629.6 million in the third quarter, down 18% from the $766.7 million it made in its fiscal second quarter. The company also reported a net loss of $246 million, and a pro forma net loss (which excludes restructuring charges and non-recurring costs) of $122.8 million.

The pro forma loss numbers are slightly better than the $135 million to $145 million 3Com projected when it gave a warning about its third quarter financials at the end of February. 3Com had projected to make $725 million to $750 million in third quarter revenue before its earnings warning.

As a result of the poor financial performance, 3Com CEO Bruce Claflin says the company will continue to restructure itself in order to save $1 billion by the end of the next fiscal year. After laying off 1,200 employees in February, 3Com says it will save $250 million. 3Com expects to save another $250 million by discontinuing its consumer Internet appliance business, which includes the Audrey home Internet appliance and the Kerbango Internet radio. The company also plans to save another $500 million by "substantially improving the use of human, financial and physical assets."

3Com's commercial sales, including LAN/WAN infrastructure products, dipped 18% from its second quarter, while its consumer sales came in at $73.5 million, down 14% from the previous quarter. CommWorks, 3Com's carrier business that was spun off as a wholly-owned subsidiary in December, reported a 19% revenue drop, taking in $76.8 million.

3Com Corp.: www.3com.com

Contact Senior Writer Phil Hochmuth

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