3Com takes a nosedive

(Telephony) 3Com’s stock has plunged more than 20% in today’s trading after the company revised its guidance downward for the third quarter.

3Com representatives were not immediately available for comment.

Much of the new guidance is significantly lower than what 3Com had previously predicted. The company anticipates revenues to be in the range of $625 million to $640 million, down from previous guidance of $725 million to $750 million. Pro forma operating loss is expected be $235 million to $245 million, higher than the $80 million to $100 million previously anticipated.

3com attributes the shortfall primarily to the slowdown in the U.S. economy, especially in the communications sector. The problem is exacerbated, said a company statement, by a shift in demand to lower-margin commercial access products, eroding prices and margins for consumer broadband modems, and higher manufacturing costs.

Though he accepts these factors as contributors, Seth Weber, vice president with Merrill Lynch, writes that other factors probably are adding to the shortfall. “As the carrier business was only expected to be about 12% of 3Q revenues, we believe additional issues exist,” he said in a note entitled “3Com Corp: Worse than We Imagined.”

3Com’s stock at about 2 p.m. EST had fallen more than 22% to $7.0938.