3Com Turns The Switch Off On High-End Networking Market - InformationWeek

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3Com Turns The Switch Off On High-End Networking Market

3Com Corp. posted a rise in earnings today and disclosed plans to step out of the high-end networking business, abandoning that stake of the market to competitors such as Cisco Systems and Nortel Networks Ltd.

In a series of moves the company says will help it focus on high-growth technologies, the company is also selling its dial-up modem and PC card business to a yet-to-be named company formed by NatSteel Electronics and Accton Technology. The new company will build and sell those products, including the US Robotics line. 3Com didn't reveal financial details and said the deals have yet to be finalized.

June 20 will be the last ship date for most models of the company's NetBuilder and PathBuilder lines, as well as all models of its CoreBuilder WAN and LAN line.

Up to 2,000 employees will be moved to the new company, and layoffs of up to 1,000 employees should be completed by September, the company said.

The company said it plans to focus on high-speed Internet access for the small-office, home-office market with digital subscriber line and cable modem technology. The company is also aligning with Copper Mountain Networks in a move to capitalize on the rapidly growing service provider market.

For the third quarter ended Feb. 25, the networking vendor reported sales of $1.42 billion, which was essentially flat compared to last year. Excluding one-time gains, the company reported pro forma net income of $97.4 million, or 27 cents per share, an increase of 9 percent from pro forma net income of $89.6 million, or 24 cents per share, last year. Including the one-time gains, net income was $506.3 million, or $1.40 per share, up from $89.7 million, 24 cents per share, in the same period last year.

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