December 07, 2000, 12:37 PM —
Networking equipment vendor 3Com Corp. yesterday
href="http://www.3com.com/news/releases/pr00/dec0400a.html" target=NEW>warned that
the expected loss for its second fiscal quarter will likely be larger than originally
predicted, due primarily to a slowdown in sales to telecommunications carriers.
The struggling Santa Clara, Calif.-based company had estimated that it would lose up
to 9 cents per share in the quarter that ended last Friday. But it now expects the
second-quarter loss to be more than twice that amount, with revenue from ongoing
businesses coming in at about $780 million -- roughly $100 million below the level 3Com
predicted in September.
Bruce Claflin, 3Com's president and chief operating officer, said during a
teleconference late yesterday afternoon that second-quarter sales "were dramatically
affected by the turmoil in the [telecommunications] industry." Claflin is scheduled to
become the company's CEO in January under a plan href="http://www.3com.com/news/releases/pr00/sep2800a.html" target=NEW>announced in
Telecommunications carriers such as AT&T Corp., WorldCom Inc. and Sprint Corp.
recently announced restructuring plans aimed at increasing their focus on business-
related data services. As a result, Claflin said, those companies were embroiled in internal issues and
didn't buy as much equipment as 3Com thought they would.
Sales in the second quarter for 3Com's carrier networking business fell to between
$95 million and $100 million, down about 30% from the same period a year ago, Claflin
said. That breaks a string of seven consecutive quarters of year-to-year revenue growth
for that business unit, he added.
However, 3Com said it views the sales drop-off as a slowdown in purchases, not lost
business altogether. Officials noted that the company is entering its third fiscal
quarter with record levels of deferred revenue from customers in the telecommunications
market. "It's not a change in deployment intentions [by the carriers] but a change in
the timing of deployment," said outgoing 3Com CEO Eric Benhamou, who will remain as
chairman after Claflin takes over.
The second-quarter results are due to be reported on Dec. 21. Looking ahead, Claflin
warned that the third quarter is traditionally 3Com's slowest in terms of revenue
generation and said that the company is likely to experience "a modest seasonal
decline" in sales, although it's hoping to at least show sequential growth compared
with the second quarter.
Ignoring sales from enterprise-level networking products that 3Com announced it was
dropping last March, second-quarter sales for the company's commercial and consumer
networks business are now expected to rise about 5% from last year's level to roughly