EX-99.1 2 b78537exv99w1.htm EX-99.1 TEXT OF PRESS RELEASE, DATED DECEMBER 23, 2009 exv99w1
Exhibit 99.1
(3COM LOGO)
FOR IMMEDIATE RELEASE
For more information contact:
         
Investor Relations
  Media Relations
Gene Skayne
  Frank Tutalo
508.323.1080
  781.782.5761
gene_skayne@3com.com
  frank_tutalo@lpp.com
3Com Reports Results for Second Quarter Fiscal Year 2010
MARLBOROUGH, MASS.—December 23, 2009—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 Reports Results for Second Quarter Fiscal 2010, p. 2
     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.