MARLBOROUGH, Mass. — 3Com Corp. <a href=http://phx.corporate-ir.net/phoenix.zhtml?c=61382&p=irol-newsArticle&ID=977131&highlight=reported a net loss for its third quarter of $4.7 million (all figures in U.S. dollars), an increase of over the $3.5 million loss in the previous quarter. However, it was an improvement over more than $30 million lost in the third quarter a year ago.
Additionally, the company also announced it has received final approval from the People’s Republic of China for the acquisition of Huawei Technologies’ 49 per cent stake in its Huawei-3Com partnership, called H3C, for $882 million. 3Com, which won the right to acquire the remaining stake in H3C through a bidding process that ended on Nov, 28, anticipates the deal will officially close on or about March 29.
To fund the transaction and related expenses, 3Com intends to use approximately $470 million of cash from its balance sheet and approximately $430 million from a senior secured bank loan at its H3C segment.
“The company continued to make progress against our operational initiatives in the third quarter, highlighted by delivering non-GAAP operating profitability for the second consecutive quarter,” said Edgar Masri, 3Com president and chief executive officer.
“3Com has delivered against each of the five areas we told investors to hold us accountable for, including receiving approval for the H3C transaction, improving the performance of our SCN (Secured Converged Networking) business unit, signing retention agreements with key members of H3C’s leadership team, and delivering on our new Open Services Networking strategy and a network access control solution from TippingPoint.”
Revenue determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was $323 million in the third quarter of fiscal 2007. That was slightly up from the previous quarter, but an 82 percent increase compared to the same period in fiscal 2006.
The company said this growth is primarily due to the consolidation of H3C revenue in the current period. Revenue grew 6 percent compared to pro forma revenue in the prior-year period, which includes the results of H3C as if it had been consolidated during the prior-year period. The H3C segment revenue was $195 million, a 35 percent increase over the prior-year quarter, and the SCN segment revenue was $157 million, an 11 percent decrease over the prior-year quarter.
3Com’s gross profit for the third quarter of fiscal 2007 was $153 million, or 47 percent of revenue, which is a 6 percentage point improvement compared to the prior-year quarter, driven primarily by the inclusion of H3C in the current period results. This resulted in a GAAP operating loss of $9 million.
The company said that was an improvement from a GAAP operating loss of $47 million in the third quarter of fiscal 2006. The $38 million improvement results from a $19 million reduction in operating loss in the SCN segment and $19 million of operating income from H3C’s results.
