3Com lowers guidance, cuts products

Citing worsening business conditions, 3Com has lowered its guidance for its fiscal fourth quarter and has announced its intention to discontinue its consumer cable and DSL modem products.

For the quarter ending June 1, the company said it would post revenues of $450 million to $475 million, down significantly from the $550 million to $600 million in revenues that had been predicted.

In addition, lower sales volumes and one-time charges related to the company’s previously announced restructuring plans are expected to result in negative gross margins for the quarter.

The lowered guidance was accompanied by the announcement that 3Com is discontinuing its production of consumer cable and DSL modems, two loss-producing product lines

According to a company spokeswoman, the canceled product lines will not result in any layoffs in addition to those already announced.

“Anyone that would be laid off has been included in the 3000 people reduction in force that we announced on May 7,” she said.

The company said in a statement that the product lines are being discontinued because they “lack the potential to deliver superior growth and financial returns. There is an industry-wide glut of consumer cable and DSL modems that has driven down prices and margins.”

The announcement makes 3Com the second company to exit the DSL modem business this week. On Thursday, Alcatel announced that it was selling its DSL modem business to Thomson Multimeda in favor of focusing on DSL network infrastructure and core technology.