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3Com beats the street, plans spin-off

Thu, 12/21/2000 - 7:00pm
Karen Kessler-Tanaka

3Com did better than expected with its earnings losses and plans a spin-off as well.

Excluding one-time costs, 3Com announced a second-quarter loss of $52.4 million, or 15 cents a share, on revenue of $789.5 million. The revenue includes $22.8 million the company earned from businesses it recently exited.

3Com executives blamed the shortfall on slower sales of networking equipment to telecommunications carriers and Internet service providers. Lucent has announced profit warnings for its current quarters, and blames its shortfall on slower equipment sales to telecommunications service providers.

3Com says it will spin off its high-end carrier equipment business, which serves customers such as America Online, AT&T and WorldCom. The new wholly-owned subsidiary, formerly called the Carrier Network Business, will now be known as CommWorks and will be led by current 3Com executive Irfan Ali, who was named president.

After a major reorganization earlier this year, when the company spun off Palm and shed its slow-growing businesses, 3Com posted strong earnings last quarter. The company lost $41.3 million, or 12 cents a share, beating analysts' predictions of a 33-cent loss.

In its March reorganization, 3Com exited the high-end corporate networking business to focus on small and medium-sized businesses and consumers, areas the company has historically dominated.

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