3Com Q1 2010 Results

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.

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