DOW JONES NEWSWIRES
3Com Corp. (COMS) swung to a fiscal third-quarter profit, its
third consecutive after a string of losses, on improved margins as
well as strong sales in China and in its network-security software
unit.
Shares rose 4% to $2.85 as earnings topped Wall Street's
expectations, though revenue was below estimates. Through
Thursday's regular trading, the stock is up 20% this year.
Chief Executive Bob Mao said strength in 3Com's China business
and TippingPoint unit, which makes network-security software, along
with "stringent cost management" more than offset weakness in other
regions.
3Com has been cutting costs as it focuses on revenue growth,
improving margins and reducing debt. The company generated $100
million in cash from operations in the latest quarter, ending the
period with cash and cash equivalents of $560 million.
For the quarter ended Feb. 27, 3Com reported net income of $1.9
million, or less than 1 cent a share, compared with a year-earlier
net loss of $7.8 million, or 2 cents a share. Excluding charges and
stock-compensation costs, earnings rose to 13 cents a share from 8
cents.
Revenue slid 3.5% to $324.7 million.
Analysts' average estimates were for per-share earnings of 10
cents on revenue of $332.3 million, according to a poll by Thomson
Reuters.
Gross margin rose to 57.2% from 53.4%.
3Com competes against much larger rivals, such as Cisco Systems
Inc. (CSCO), but it also sells antihacking and other
network-security services to the U.S. Defense Department. That
business line ultimately sank its proposed $2.2 billion buyout last
year by private-equity firm Bain Capital Partners LLC and its
Chinese partner, though two-thirds of 3Com's 6,000 employees work
in Beijing.
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
Kathy.Shwiff@dowjones.com