3Com beats Street estimates, but unsure about Q4

Despite a 10% dip in sequential revenue, 3Com posted a narrower than expected net loss for its fiscal third quarter 2002 that ended March 1.

For the quarter, 3Com reported revenues of $356 million, down from $394 million in the previous quarter and $630 million a year ago. Pro forma loss for the quarter was $42 million, or 16 cents per share, which was 4 cents better than the consensus analyst estimate taken from First Call. Net loss was $236 million, or 67 cents per share.

CommWorks, the company’s telecom equipment unit, faired worse than the business as a whole. Revenues for the division were $52 million, a 19% decreased from the $64 million posted the previous quarter. CommWorks’ revenue for the third quarter a year ago was $78.6 million.

Despite besting Wall Street analysts’ estimates, 3Com remain unsure about its fourth quarter. Previously, the company had established the target of achieving pro forma profitability in Q4. While 3Com maintains it is still possible to meet that goal, it did not give any assurances.

“Achieving pro forma profitability will require continued improvements in cost and expense,” said Bruce Claflin, 3Com’s president and CEO. “I believe the goal is achievable, albeit at considerable risk. While I cannot guarantee it will be achieved, I believe, at a minimum, we will demonstrate considerable progress toward its achievement.”

Such uncertainty is reflected in 3Com’s guidance for the fourth quarter. The company expects revenues to be anywhere from a 5% decrease to a 5% increase sequentially. 3Com’s gross margin is projected to rise two to three points, and pro forma expenses should be cut $20 million to $25 million.