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3Com Reports Networking Sales Growth

Posted by iNext - 2005-12-24

3Com Wednesday reported a smaller loss and slightly higher revenue in its second fiscal quarter, driven by increased sales.

Marlborough, Mass.-based 3Com, which makes network infrastructure equipment, reported a net loss of $10.7 million, or 3 cents a share, compared to a loss of $48.8 million, or 13 cents a share, for the same period last year. North American revenue declined 10 percent sequentially, but was offset by strong worldwide revenue of $184 million, which represented a 4 percent sequential growth from Q1.

Sales of 3Com's networking products were the biggest growth driver, bringing in $132 million, an increase of 12 percent year-over-year that was fueled by sales of 3Com's Layer 2 and Layer 3 stackable 10/100/1000 managed switches and Office Connect and Baseline-branded SMB products, according to Don Halsted, 3Com executive vice president and chief financial officer.

Revenue from products stemming from 3Com's joint venture with Chinese networking giant Huawei Technologies quadrupled during the quarter to more than $20 million. For its third quarter that ended September 30, 2005, revenue for the Huawei-3Com joint venture was $111 million, an increase of 16 percent over the previous quarter and a 69 percent increase year-on-year. Sales of the jointly developed 5500 line of Layer 3 switches with Gigabit Ethernet and Power Over Ethernet were particularly brisk, Halsted said.

Huawei-3Com now has more than 3,400 employees, more than half of whom are engineers, according to Bruce Claflin, 3Com president and chief executive officer. "With this growth in engineering talent, the joint venture has taken increased responsibility to develop infrastructure products for 3Com," Claflin said.

3Com's security products generated revenue of $21 million, a sequential growth of 24 percent that was fueled by the TippingPoint acquisition, as well as strong growth in embedded firewall products. Services revenue rose 12 percent sequentially, but revenue from voice products declined 8 percent sequentially, and connectivity product revenue declined 16 percent sequentially, according to Halsted.

3Com recently announced changes to its channel program to reward partners for developing technology expertise and increasing their investments. With the new Focus Partner Program, 3Com will institute a point system for achievement of Gold, Silver and Bronze status so that partners will have a clearer understanding of how to reach the higher levels.

3Com also recently launched technology specialization focus areas in IP telephony, enterprise LAN, security and enterprise wireless.

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