3Com Earnings Grow, Sales Slip

Positive earnings bolster the network switching, routing, and security firm ahead of its acquisition by HP.



Networking pioneer 3Com reported its second quarter financial results Wednesday -- likely its last as an independent company before its acquisition by HP -- and delivered positive earnings that rose 55%, but saw sales slip.

The network switching, routing, and security solutions firm said its profit for the quarter was $20 million, an increase from the $12.9 million it reported in the previous year's quarter. Revenue was $322.2 million, a 9.1% decrease from last year's results.

"We are pleased with 3Com's performance in the quarter," said Chief Executive Officer Bob Mao in a statement. "We exceeded our guidance for revenue, operating profit, earnings per share, and our cash balance, while delivering sequential revenue growth across all our sales regions and achieving record gross and operating margins."

Mao was brought in to lead the company last year after several months of tumultuous events including an attempt to bolster 3Com's partnership with its Chinese partner, Huawei Technologies. Various attempts to restructure the company failed after U.S. regulatory agencies frowned on attempts that involved Bain Capital Partners.

HP has agreed to acquire 3Com for $2.7 billion in a deal that will strengthen HP as it gears up for more vigorous competition with Cisco. The 3Com acquisition broadens the networking technology HP can fold into its data-center offerings.

3Com noted that its second quarter revenues grew 10.9% sequentially to $290.5 million over its previous quarter. The networking firm has three main units -- Tipping Point, an intrusion prevention provider, traditional networking provider 3Com, and H3C, which is linked to Huawei. The company said its sales to Huawei declined 35.3% to $18,2 million, but its China-based sales were up 21.9% sequentially to $151.1 million.

Founded in 1979, 3Com has 5,800 employees.

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