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3Com posts big loss
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March 21, 2001: 12:36 p.m. ET
Network equipment maker plans job cuts in $1B restructuring program
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NEW YORK (CNNfn) - Computer network hardware maker 3Com Corp. posted a fiscal third-quarter loss Wednesday that was more than Wall Street forecasts and announced a $1 billion restructuring plan that includes job cuts and the discontinuation of certain products.
3Com -- which makes such products as modems, Internet appliances and network interface cards -- said it lost $123 million, or 36 cents a share, in the quarter ended March 2, excluding non-recurring costs.
Analysts surveyed by First Call had forecast a loss of 33 cents per share in the most recent quarter.
At $629.6 million, 3Com's sales fell 45 percent from the same quarter a year earlier, a decline executives blamed on weaker demand in the face of a slowing U.S. economy.
Including one-time charges, 3Com's net loss for the quarter was $246 million, or 72 cents per share.
"The abruptness and severity of the current technology slowdown has clearly impacted 3Com," Bruce Claflin, the company's chief executive, said in a statement. "3Com is taking immediate steps to reduce costs and achieve profitability."
In addition to the sluggish U.S. economy, 3Com said its bottom line was hurt by a shift in demand to less profitable commercial access products, eroding prices and profit margins in its consumer broadband modem business, higher unit costs attributable to fixed manufacturing charges being spread across lower production volumes, and higher provisions for excess and obsolete inventory due to the reduced demand.
As part of a continuing effort to beef up its bottom line, 3Com announced a raft of additional restructuring initiatives through which the company is aiming to save $1 billion by the end of the coming fiscal year. 3Com executives said they believe the company can reach positive cash flow from operations by the second quarter of the coming fiscal year and achieve operating profitability by the fourth quarter.
3Com said the laying off of an as-yet unspecified number of employees will account for about a quarter of the proposed savings. The company also said it will save about $250 million by substantially reducing the cost of operating its broadband modem business and discontinuing its consumer "information appliance" product line, which includes the "Audrey" Web access device.
3Com said it will achieve the remaining $500 million in savings by streamlining its operations and simplifying its business structure, product lines and systems.
The company expects to record unspecified charges over the next two-to-four fiscal quarters to support the restructuring plan. Executives said the specific details about the job cuts will be revealed as they are implemented.
During the fiscal third quarter, 3Com already had announced restructuring measures it said would cut about $250 million in costs, the bulk of which would come from the elimination of 1,200 jobs.
Shares of 3Com (COMS: Research, Estimates) rose 3 cents to $6.25 Wednesday afternoon. 
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