3Com 3Q sales up 30%, net rises

Electronic News, March 24, 1997

Santa Clara, Calif.--3Com Corp. reported 3Q97 sales grew 30 percent to $786.8 million from $606.2 million in 3Q96. Net income for the quarter ended Feb. 28 was $87.6 million, or 47 cents per share, versus $74.6 million, or 42 cents per share.

Sales of systems products, including switches, hubs, internetworking and remote access products, were $432.6 million for the quarter, up 24 percent compared to the year-ago period. Sales of network adapters increased 39 percent from the same quarter a year ago, to $346.3 million, 3Com said.

For the first nine months of FY97, sales were $2.3 billion versus $1.7 billion in the same period a year ago. Excluding non-recurring items in both periods, net income for the first nine months of FY97 was $291.4 million, or $1.57 per share, up 47 percent over net income of $197.6 million, or $1.12 per share, for the same period last year. Reported net income was $284.7 million, or $1.53 per share fully diluted, versus $148.4 million, or 84 cents per share fully diluted, in the year-ago period.

Said Chairman/CEO Eric Benhamou: "During the quarter we saw strong demand for our high-end networking solutions, particularly ATM systems...and orders we received from large accounts have never been greater....At the same time, our industry is in the midst of many important transitions.

Pause In Industry Demand

"These include the adoption of higher-speed technologies, new paradigms for switching and routing network traffic, and more volume-based pricing and distribution. While these changes are all positive for 3Com and the industry in the long run, during the current quarter our results reflected increased price competition and a pause in industry demand as enterprise networking customers and network service providers assess how best to maximize their networking investments."

On Feb. 26, 3Com announced a definitive agreement to merge with U.S. Robotics Corp., a supplier of products and systems for accessing information across the wide-area network, including modems and remote access products (EN, March 3). The combined company, which will retain the 3Com name, will have revenues in excess of $5 billion annually.

Under the terms of the agreement, each share of U.S. Robotics stock will be exchanged for 1.75 shares of 3Com stock. The transaction will be accounted for as a pooling of interests, and is expected to be neutral to slightly accretive to 3Com earnings in FY98. Completion of the transaction is subject to approval of both companies' shareholders as well as certain regulatory approvals. A preliminary S-4 proxy statement/prospectus is on file with the Securities and Exchange Commission, and the companies have filed pre-merger notification reports under the Hart-Scott-Rodino Act.