| 3Com Reports Results for Second Quarter Fiscal Year 2010 |
Please click here for a complete version of the financial tables.
MARLBOROUGH, Mass., Dec 23, 2009 (BUSINESS WIRE) -- 3Com Corporation (Nasdaq: COMS) today reported financial results for its fiscal 2010 second quarter, which ended November 27, 2009. Revenue in the quarter was $322.2 million, compared to revenue of $354.6 million in the corresponding period in fiscal 2009, a 9.1 percent decrease.
Second quarter revenue increased 10.9 percent sequentially, from $290.5 million in the prior quarter. Revenue grew sequentially across all major sales regions, primarily driven by a solid recovery in the Europe, Middle East and Africa region and in our Latin America business, and continued strong performance in China. Sales to Huawei continued to decline as expected, coming in at $18.2 million, down 35.3 percent sequentially, while China based direct-touch sales reached $151.1 million in the quarter, up 21.9 percent sequentially.
3Com achieved gross margin in the quarter of 60.1 percent. This compares with gross margin of 57.3 percent in the first quarter of fiscal year 2010, and 56.3 percent in second quarter of fiscal year 2009.
3Com also achieved GAAP operating profit margin of 4.5 percent in the quarter. Non-GAAP operating profit margin hit a record 13.5 percent in the second quarter, compared with 9.1 percent in the first quarter of fiscal year 2010, and 10.8 percent in the second quarter of the prior year.
Net income in the quarter was $20.0 million, or $0.05 per diluted share, compared with net income of $12.9 million, or $0.03 per diluted share, in the second quarter of fiscal year 2009. Q2 FY10 results include a favorable tax adjustment of $10.8 million offset in part by transaction costs of approximately $4.6 million relating to the Company's pending merger with Hewlett-Packard Company. On a non-GAAP basis, net income for the second quarter of fiscal year 2010 was $38.3 million, or $0.09 per diluted share, compared with net income of $46.9 million, or $0.12 per diluted share, for the second quarter of fiscal year 2009.
3Com generated $118.2 million in cash from operations in the quarter. 3Com's cash and equivalents and short term investments balance at November 27, 2009 was $704.1 million. During the quarter 3Com repaid $88.0 million of its debt, including a voluntary payment of $40.0 million.
"We are pleased with 3Com's performance in the quarter," said Bob Mao, 3Com's Chief Executive Officer. "We exceeded our guidance for revenue, operating profit, earnings per share, and our cash balance, while delivering sequential revenue growth across all our sales regions and achieving record gross and operating margins."
3Com Corporation does not intend, and disclaims any obligation, to update any forward-looking information contained in this release or with respect to the announcements described herein.
The non-GAAP measures used by the Company exclude restructuring, amortization, stock-based compensation expense and, if applicable in the relevant period, unusual items, such as those items detailed in the tables attached to this press release. The required reconciliations and other disclosures for all non-GAAP measures used by the Company are set forth later in this press release, in the Current Report on Form 8-K furnished to the SEC on the date hereof and/or in the investor relations section of our Web site, www.3com.com.
References to the financial information included in this news release reflect rounded numbers and should be considered approximate values.
About 3Com Corporation
3Com Corporation is a $1.3 billion global enterprise networking solutions provider that sets a new price/performance standard for customers. 3Com has three global brands--H3C, 3Com, and TippingPoint--that offer high-performance networking and security solutions to enterprises large and small. The H3C enterprise networking portfolio--a market leader in China--includes products that span from the data center to the edge of the network, while TippingPoint network-based intrusion prevention systems and network access control solutions deliver in-depth, no-compromise application, infrastructure and performance protection.
Copyright© 2009 3Com Corporation. 3Com, the 3Com logo, H3C and TippingPoint are registered trademarks of 3Com Corporation or its wholly owned subsidiaries in various countries around the world. All other company and product names may be trademarks of their respective holders.
| 3Com Corporation |
| Condensed Consolidated Statements of Operations |
| (in thousands, except per share data) |
| (unaudited) |
| TABLE A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
November 27, |
|
August 28, |
|
November 28, |
|
November 27, |
|
November 28, |
|
|
|
|
|
2009 |
|
|
|
2009 |
|
|
|
2008 |
|
|
|
2009 |
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
|
$ |
322,164 |
|
|
$ |
290,502 |
|
|
$ |
354,562 |
|
|
$ |
612,666 |
|
|
$ |
697,212 |
|
| Cost of sales |
|
|
128,542 |
|
|
|
123,931 |
|
|
|
154,770 |
|
|
|
252,473 |
|
|
|
307,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
193,622 |
|
|
|
166,571 |
|
|
|
199,792 |
|
|
|
360,193 |
|
|
|
389,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
93,754 |
|
|
|
84,788 |
|
|
|
89,920 |
|
|
|
178,542 |
|
|
|
177,402 |
|
|
Research and development |
|
|
41,400 |
|
|
|
38,968 |
|
|
|
49,254 |
|
|
|
80,368 |
|
|
|
96,401 |
|
|
General and administrative |
|
|
25,786 |
|
|
|
21,370 |
|
|
|
28,652 |
|
|
|
47,156 |
|
|
|
53,106 |
|
|
Amortization of intangibles |
|
|
16,755 |
|
|
|
17,071 |
|
|
|
25,060 |
|
|
|
33,826 |
|
|
|
50,224 |
|
|
Patent dispute resolution |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(70,000 |
) |
|
Restructuring charges |
|
|
1,552 |
|
|
|
1,133 |
|
|
|
2,504 |
|
|
|
2,685 |
|
|
|
4,501 |
|
|
|
Operating expenses, net |
|
|
179,247 |
|
|
|
163,330 |
|
|
|
195,390 |
|
|
|
342,577 |
|
|
|
311,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
14,375 |
|
|
|
3,241 |
|
|
|
4,402 |
|
|
|
17,616 |
|
|
|
77,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense, net |
|
|
(1,922 |
) |
|
|
(1,088 |
) |
|
|
(547 |
) |
|
|
(3,010 |
) |
|
|
(1,798 |
) |
| Other income, net |
|
|
5,920 |
|
|
|
11,547 |
|
|
|
15,899 |
|
|
|
17,467 |
|
|
|
28,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income before income taxes |
|
|
18,373 |
|
|
|
13,700 |
|
|
|
19,754 |
|
|
|
32,073 |
|
|
|
104,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax provision |
|
|
1,619 |
|
|
|
(6,239 |
) |
|
|
(6,884 |
) |
|
|
(4,620 |
) |
|
|
(12,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
19,992 |
|
|
$ |
7,461 |
|
|
$ |
12,870 |
|
|
$ |
27,453 |
|
|
$ |
92,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted income per share |
|
$ |
0.05 |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
0.07 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in computing basic per share amounts |
|
|
392,688 |
|
|
|
389,774 |
|
|
|
394,036 |
|
|
|
391,231 |
|
|
|
398,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in computing diluted per share amounts |
|
|
403,501 |
|
|
|
396,266 |
|
|
|
395,245 |
|
|
|
399,884 |
|
|
|
399,658 |
|
| 3Com Corporation |
| Condensed Consolidated Balance Sheets |
| (in thousands) |
| (unaudited) |
| TABLE B |
|
|
|
|
November, 27 |
|
May 29, |
|
|
|
|
2009 |
|
2009 |
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and equivalents |
|
$ |
704,079 |
|
$ |
545,818 |
|
Short term investments |
|
|
- |
|
|
98,357 |
|
Notes receivable |
|
|
35,697 |
|
|
40,590 |
|
Accounts receivable, net |
|
|
110,297 |
|
|
112,771 |
|
Inventories, net |
|
|
94,844 |
|
|
90,395 |
|
Other current assets |
|
|
55,307 |
|
|
56,982 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,000,224 |
|
|
944,913 |
|
|
|
|
|
|
|
| Property & equipment, net |
|
|
36,805 |
|
|
40,012 |
| Goodwill |
|
|
609,297 |
|
|
609,297 |
| Intangibles, net |
|
|
164,931 |
|
|
198,624 |
| Deposits and other assets |
|
|
23,761 |
|
|
22,511 |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,835,018 |
|
$ |
1,815,357 |
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
81,632 |
|
$ |
68,350 |
|
Current portion of long-term debt |
|
|
48,000 |
|
|
48,000 |
|
Accrued liabilities and other |
|
|
427,943 |
|
|
394,103 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
557,575 |
|
|
510,453 |
|
|
|
|
|
|
|
| Deferred taxes and long-term obligations |
|
|
40,695 |
|
|
40,729 |
| Long-term debt |
|
|
64,000 |
|
|
152,000 |
| Stockholders' equity |
|
|
1,172,748 |
|
|
1,112,175 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
|
$ |
1,835,018 |
|
$ |
1,815,357 |
| 3Com Corporation |
| Reconciliation of Non-GAAP Financial Measures |
| (in thousands, except margin and per-share data) |
| (unaudited) |
| TABLE C |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
November 27, |
|
August 28, |
|
November 28, |
|
November 27, |
|
November 28, |
|
|
2009 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
| GAAP operating income |
|
$ |
14,375 |
|
|
$ |
3,241 |
|
|
$ |
4,402 |
|
|
$ |
17,616 |
|
|
$ |
77,785 |
|
| Restructuring |
|
|
1,552 |
|
|
|
1,133 |
|
|
|
2,504 |
|
|
|
2,685 |
|
|
|
4,501 |
|
| Amortization of intangible assets |
|
|
16,755 |
|
|
|
17,071 |
|
|
|
25,060 |
|
|
|
33,826 |
|
|
|
50,224 |
|
| Patent dispute resolution [a] |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(70,000 |
) |
| Acquiree expensed acquisition costs [c] |
|
|
4,552 |
|
|
|
- |
|
|
|
- |
|
|
|
4,552 |
|
|
|
- |
|
| Stock-based compensation expense [b] |
|
|
6,233 |
|
|
|
4,885 |
|
|
|
5,638 |
|
|
|
11,118 |
|
|
|
12,080 |
|
| TippingPoint special admin costs [d] |
|
|
- |
|
|
|
- |
|
|
|
800 |
|
|
|
- |
|
|
|
800 |
|
| Non-GAAP operating income |
|
$ |
43,467 |
|
|
$ |
26,330 |
|
|
$ |
38,404 |
|
|
$ |
69,797 |
|
|
$ |
75,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating profit margin |
|
|
4.5 |
% |
|
|
1.1 |
% |
|
|
1.2 |
% |
|
|
2.9 |
% |
|
|
11.2 |
% |
| Restructuring |
|
|
0.5 |
% |
|
|
0.4 |
% |
|
|
0.7 |
% |
|
|
0.4 |
% |
|
|
0.6 |
% |
| Amortization of intangible assets |
|
|
5.2 |
% |
|
|
5.9 |
% |
|
|
7.1 |
% |
|
|
5.5 |
% |
|
|
7.2 |
% |
| Patent dispute resolution [a] |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
-10.0 |
% |
| Stock-based compensation expense [b] |
|
|
1.4 |
% |
|
|
- |
|
|
|
- |
|
|
|
0.8 |
% |
|
|
- |
|
| Acquiree expensed acquisition costs [c] |
|
|
1.9 |
% |
|
|
1.7 |
% |
|
|
1.6 |
% |
|
|
1.8 |
% |
|
|
1.7 |
% |
| TippingPoint special admin costs [d] |
|
|
- |
|
|
|
- |
|
|
|
0.2 |
% |
|
|
- |
|
|
|
0.1 |
% |
| Non-GAAP operating profit margin |
|
|
13.5 |
% |
|
|
9.1 |
% |
|
|
10.8 |
% |
|
|
11.4 |
% |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income |
|
$ |
19,992 |
|
|
$ |
7,461 |
|
|
$ |
12,870 |
|
|
$ |
27,453 |
|
|
$ |
92,707 |
|
| Restructuring |
|
|
1,552 |
|
|
|
1,133 |
|
|
|
2,504 |
|
|
|
2,685 |
|
|
|
4,501 |
|
| Amortization of intangibles |
|
|
16,755 |
|
|
|
17,071 |
|
|
|
25,060 |
|
|
|
33,826 |
|
|
|
50,224 |
|
| Patent dispute resolution [a] |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(70,000 |
) |
| Stock-based compensation expense [b] |
|
|
6,233 |
|
|
|
4,885 |
|
|
|
5,638 |
|
|
|
11,118 |
|
|
|
12,080 |
|
| Acquiree expensed acquisition costs [c] |
|
|
4,552 |
|
|
|
- |
|
|
|
- |
|
|
|
4,552 |
|
|
|
- |
|
| TippingPoint special admin costs [d] |
|
|
- |
|
|
|
- |
|
|
|
800 |
|
|
|
|
|
800 |
|
| Tax adjustment related to resolution of 2008 tax rate in PRC [e] |
|
|
(10,801 |
) |
|
|
- |
|
|
|
- |
|
|
|
(10,801 |
) |
|
|
- |
|
| Non-GAAP net income |
|
$ |
38,283 |
|
|
$ |
30,550 |
|
|
$ |
46,872 |
|
|
$ |
68,833 |
|
|
$ |
90,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| GAAP net income per share |
|
$ |
0.05 |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
0.07 |
|
|
$ |
0.23 |
|
| Restructuring |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
| Amortization of intangibles |
|
|
0.04 |
|
|
|
0.04 |
|
|
|
0.06 |
|
|
|
0.08 |
|
|
|
0.13 |
|
| Patent dispute resolution [a] |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.17 |
) |
| Stock-based compensation expense [b] |
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.03 |
|
|
|
0.03 |
|
| Acquiree expensed acquisition costs [c] |
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
| TippingPoint special admin costs [d] |
|
|
- |
|
|
|
- |
|
|
|
0.00 |
|
|
|
- |
|
|
|
0.00 |
|
| Tax adjustment related to resolution of 2008 tax rate in PRC [e] |
|
|
(0.03 |
) |
|
|
- |
|
|
|
- |
|
|
|
(0.03 |
) |
|
|
- |
|
| Non-GAAP net income per share, diluted |
|
$ |
0.09 |
|
|
$ |
0.08 |
|
|
$ |
0.12 |
|
|
$ |
0.17 |
|
|
$ |
0.23 |
|
| Shares used in computing diluted per share amounts |
|
|
403,501 |
|
|
|
396,266 |
|
|
|
395,245 |
|
|
|
399,884 |
|
|
|
399,658 |
|
|
|
|
|
|
|
|
|
|
|
|
| [a] Resolution of Realtek patent dispute. |
| [b] Stock-based compensation expense is included in the following cost and expense categories by period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
November 27, |
|
August 28, |
|
November 28, |
|
November 27, |
|
November 28, |
|
|
2009 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
| Cost of sales |
|
|
591 |
|
|
|
540 |
|
|
|
562 |
|
|
|
1,131 |
|
|
|
1,320 |
|
| Sales and marketing |
|
|
2,081 |
|
|
|
1,590 |
|
|
|
1,613 |
|
|
|
3,671 |
|
|
|
3,371 |
|
| Research and development |
|
|
423 |
|
|
|
476 |
|
|
|
893 |
|
|
|
899 |
|
|
|
1,777 |
|
| General and administrative |
|
|
3,138 |
|
|
|
2,279 |
|
|
|
2,570 |
|
|
|
5,417 |
|
|
|
5,612 |
|
|
|
|
|
|
|
|
|
|
|
|
| [c] These expenses relate to the proposed acquisition of the Company in November 2009. |
| [d] Costs incurred in the second quarter of fiscal 2009 to facilitate operation of TippingPoint as a more autonomous business. |
| [e] We recorded a favorable tax adjustment, reflecting final resolution of our calendar year 2008 tax rate in China. |
SOURCE: 3Com Corporation
3Com Corporation
Investor Relations
Gene Skayne, 508-323-1080
gene_skayne@3com.com
or
Media Relations
Frank Tutalo, 781-782-5761
frank_tutalo@lpp.com |
|
