Slack Demand Hurts 3Com

Despite recent reports suggesting a turnaround for the networking equipment sector, 3Com Corp. this morning said it will miss quarterly revenue targets.

The Santa Clara, Calif., company said third quarter revenues will be between $240 million and $245 million. Sales in its enterprise networking unit will fall 13 percent to 14 percent from the previous quarter “due largely to weakness in the North American market.”

Sales of connectivity products will slide by slightly more than the previous guidance of 20 percent, after setting aside $15 million in royalties from received in the previous quarter. And 3Com’s CommWorks sales, previously expected to be flat, are now predicted to drop about 7 percent

The results will be further detailed and discussed during a conference call with analysts and media on March 19.

The earnings warning comes during a busy week for 3Com. Yesterday, modem manufacturer PCTEL filed a patent infringement case against rival 3Com. The Chicago-based company claims 3Com breaches one of its fundamental modem patents relating to V.34 (lower speed) and V.90 (56 KBPS) modems.

And earlier this week, the company announced it would sell parts of its CommWorks business for $100 million in cash to telecommunications vendor UTStarcom. The deal, which has approval of both boards, is expected to close this spring.

Subsequently, 3Com will take a “laser-like focus” to expand into higher-end data and voice offerings and compete more for mid to large-size customers and the channels that serve them.

The company will still offer integrated system designs and architectures while investing in ASIC and software development for emerging technologies including IP telephony, security, storage, wireless, Gigabit and 10 Gigabit switching, Layer 3 switching, and Layer 4-7 switching.

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