8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 
FORM 8-K

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 
Date of Report (Date of earliest event reported):
December 19, 2007
 

3COM CORPORATION

  (Exact name of registrant as specified in its charter)  

Delaware
(State or other jurisdiction of
incorporation) 0-12867
(Commission
File Number) 94-2605794
(IRS Employer
Identification No.)

 
350 Campus Drive
Marlborough, Massachusetts
01752
(Address of Principal Executive Offices)
(Zip Code)

 

Registrant’s telephone number, including area code: (508) 323-1000

   

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

þ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Ex-99.1 Text of Press Release, dated December 19, 2007

Ex-99.2 Supplemental Financial Information

Ex-99.3 H3C - Summary Financial Information Provided to Bank Lenders

ITEM 2.02 Results of Operations and Financial Condition

Financial Results.

          On December 19, 2007, 3Com Corporation (the “Company”) (i) issued a press release regarding its financial results for its fiscal quarter ended November 30, 2007 (“Q2 FY08”) and (ii) posted supplementary financial information concerning the Company’s Q2 FY08 fiscal quarter to the investor relations portion of its web site, www.3Com.com. The full text of the press release is attached hereto as Exhibit 99.1. The supplementary financial material is attached hereto as Exhibit 99.2.

          The information in Item 2.02 of this Form 8-K and the exhibits attached hereto as Exhibit 99.1 and Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Non-GAAP Financial Measures.

          The attached press release contains non-GAAP financial measures. In evaluating the Company’s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under generally accepted accounting principles in the United States (“GAAP”).

          More specifically, the Company uses the following non-GAAP financial measures: non-GAAP operating profit/loss, non-GAAP net income/loss and non-GAAP net income/loss per share.

          Discussion. The Company uses these measures in its public statements. Management believes these non-GAAP measures help indicate the Company’s baseline performance before gains, losses or charges that are considered by management to be outside on-going operating results. Accordingly, management uses these non-GAAP measures to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

• the ability to better identify trends in the Company’s underlying business and perform related trend analysis;

• a higher degree of transparency for certain expenses (particularly when a specific charge impacts multiple line items);

• a better understanding of how management plans and measures the Company’s underlying business; and

• an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

          The non-GAAP operating loss or income measure used by the Company is defined to exclude the following charges and benefits: restructuring, amortization, in-process research and development, stock-based compensation expense and special items that management believes are unusual and outside of the Company’s on-going operations, such as, for some of the periods presented in the press release, a portion of H3C’s Equity Appreciation Rights Plan, or EARP, bonus triggered by a change in control, the inventory-related adjustment portion of the purchase accounting effects of the Company’s acquisition of 49% of H3C and expenses related to the Company’s proposed acquisition by affiliates of Bain Capital.

          Management believes the costs related to restructuring activities are not indicative of the Company’s normal operating costs. The restructuring charge consists primarily of severance expense and facility closure costs.

          Management also believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions

may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both the Company’s newly acquired and long-held businesses. Also, amortization is a non-cash charge for the periods presented.

          In addition, the Company has non-recurring in-process research and development expenses which are non-cash and related to acquisitions as opposed to the Company’s core operations.

          Further, stock-based compensation expenses are non-cash charges that relate to restricted stock amortization and stock-based compensation costs associated with acquisitions, as well as additional stock-based compensation expense that represents the fair value of stock-based compensation required pursuant to FAS 123 (R). The expense related to acquisitions is not part of the Company’s normal operating costs and is non-cash. The FAS 123 (R)-related expense is excluded because management believes as a non-cash charge it does not provide a meaningful indicator of the core operating business results. Management manages the business primarily without regard to these non-cash expenses. In addition, because the calculation of these expenses is dependent on factors such as forfeiture rate, volatility of the Company’s stock and a risk-free interest rate, all of which are subject to fluctuation, these charges are expected to be variable over time, and therefore may not provide a meaningful comparison of core operating results among periods. It is useful to note that these factors are generally outside the Company’s control.

          The Company has excluded a portion of the EARP payment. When 3Com and Huawei set up their H3C joint venture in China, they contemplated that one of the shareholders could buy out the other on the third anniversary of the joint venture’s formation. In order to incent the employees of H3C to create value in the joint venture, the shareholders implemented the EARP, which had two components. One component was based on EBIT generation. The other was triggered solely upon a change in control whereby one shareholder bought out the other. The payout for this second component was based on a percentage of the increase in value of the joint venture, and would pay out over time after the buy-out. When 3Com purchased the remaining 49% of H3C from Huawei on March 29, 2007, the change in control EARP payment was triggered. The initial payment that is not subject to continued employment is a one-time payment that was triggered by the acquisition and is clearly a one-time item. As management views this as part of the cost of the acquisition, it believes it is not representative of the on-going core operations of the company. Accordingly, management does not measure H3C’s performance during this period with this charge included.

          The Company has excluded the purchase accounting inventory-related adjustment from the 49% acquisition described above. Similar to IPR&D and amortization described above with respect to acquisitions, these adjustments represent non-cash, one-time items relating to a specific acquisition as opposed to core operations.

          Finally, the Company excludes expenses related to its proposed acquisition by affiliates of Bain Capital. These expenses are one-time charges that are not indicative of core operations as they relate to a one-time specific transaction to take the Company private.

          The Company also uses a non-GAAP net income/loss measure. All of the items described above are relevant to why management believes this measure is meaningful. In addition, the following further items, which are special items for the relevant fiscal periods, were excluded, from this measure: gain on sales of assets and gain from insurance settlement. Gains on asset sales are outside of the ordinary course of business and not representative of core operations. Similarly, the insurance settlement related to monies paid under a policy insuring the Hemel property owned by the Company which was destroyed by an oil depot explosion. Accordingly, in order to provide meaningful comparisons, the Company believes that it needs to adjust for gains as well as charges that are outside the core operations.

          Also, for prior periods when Huawei owned 49% of H3C it is necessary to further adjust the foregoing adjustments that impacted H3C’s financials by a factor of 0.49 in order to provide a meaningful comparison of 3Com’s operations. For this reason, the Company adjusted for Huawei’s portion of the amortization and EARP charges during those prior periods.

          3Com also uses a non-GAAP net income/loss measure on a per share basis. All of the adjustments described above are relevant to this per share measure. The Company believes that it is important to provide per

share metrics, in addition to absolute dollar measures, when describing its business, including when presenting non-GAAP measures.

          General. These non-GAAP measures have limitations, however, because they do not include all items of income and expense that impact the Company’s operations. Management compensates for these limitations by also considering the Company’s GAAP results. The non-GAAP financial measures the Company uses are not prepared in accordance with, and should not be considered an alternative to, measurements required by GAAP, such as operating loss, net loss and loss per share, and should not be considered measures of the Company’s liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measures reported by other companies.

ITEM 7.01 Regulation FD Disclosure

          On December 19, 2007, as required by its senior secured credit facility the Company made available to its senior secured bank lenders certain summary financial information concerning its H3C division. This financial data is attached hereto as Exhibit 99.3 and is hereby incorporated by reference into this Item 7.01. As described in Exhibit 99.3, the financial data set forth in Exhibit 99.3 differs in certain respects from the H3C segment data published by the Company in its financial press releases.

          The information in Item 7.01 of this Form 8-K and the exhibit attached hereto as Exhibit 99.3 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 8.01 Other Events

     On December 19, 2007, the Company issued a press release regarding its financial results for its Q2 FY08. The release is attached hereto as Exhibit 99.1. The sentences in such release that relate to our proposed merger with affiliates of Bain Capital are hereby incorporated by reference in this Item 8.01. Other than as set forth in the immediately preceding sentence, Exhibit 99.1 shall not be deemed “filed” or incorporated by reference for any purpose.

ITEM 9.01 Financial Statements and Exhibits

     (d) Exhibits

Exhibit Number	Description
99.1	Text of Press Release, dated December 19, 2007, titled “3Com Reports Second Quarter Fiscal Year 2008 Results.”
99.2	Supplemental Financial Information – Fiscal Quarter Ended November 30, 2007
99.3	H3C — Summary Financial Information Provided to Bank Lenders

 

 
SIGNATURE
 

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	3COM CORPORATION
Date:  December 19, 2007	By:	/s/ Jay Zager
		Jay Zager
		Executive Vice President and Chief Financial Officer

 

EXHIBIT INDEX

Exhibit Number	Description
99.1	Text of Press Release, dated December 19, 2007, titled “3Com Reports Second Quarter Fiscal Year 2008 Results.”
99.2	Supplemental Financial Information – Fiscal Quarter Ended November 30, 2007
99.3	H3C — Summary Financial Information Provided to Bank Lenders

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

For more information contact:

Media & Investor Relations	Media Relations
John Vincenzo	Kevin Flanagan
508.323.1260		508.323.1101
john_vincenzo@3com.com		kevin_flanagan@3com.com

3COM REPORTS SECOND QUARTER FISCAL YEAR 2008 RESULTS

MARLBOROUGH, MASS. — December 19, 2007 — 3Com Corporation (NASDAQ: COMS) today reported financial results for its fiscal 2008 second quarter, which ended November 30, 2007. Revenue in the quarter was $317.8 million compared to revenue of $333.0 million in the corresponding period in fiscal 2007, a 4.6 percent decrease.

     Net loss in the quarter was $35.6 million, or $0.09 per share, compared with a net loss of $3.5 million, or $0.01 per share, in the second quarter of fiscal year 2007. The net loss increase was primarily a result of purchase accounting related to the acquisition of Huawei’s 49 percent ownership of H3C. On a non-GAAP basis, net income was $13.0 million or $0.03 per diluted share, compared with net income of $7.8 million or $0.02 per share for the second quarter of fiscal year 2007.

     In the second quarter, 3Com generated $6.4 million in cash from operations, compared to a use of cash from operations of $8.3 million in the second quarter of fiscal year 2007.

     “We made progress in several areas of the business in the second quarter,” said Edgar Masri, 3Com President and CEO. “While our overall revenue was lower than we anticipated, our gross margins were the highest they’ve been in recent history; we once again generated cash from operations; and we recorded our fifth consecutive quarter of non-GAAP operating profit. I also am very pleased with the progress of our Europe, Middle East and Africa region, which continued its rebound with strong top- and bottom-line improvements.”

     3Com and affiliates of Bain Capital, LLC continue to work together towards closing the previously announced proposed acquisition of the Company. The transaction is expected to be completed by the first quarter of calendar year 2008, subject to receipt of 3Com shareholder approval, customary regulatory approvals and other customary closing conditions.

     For additional financial information, please refer to the Investor Relations section of our Web site.

Safe Harbor

This news release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our business objectives and our proposed acquisition by affiliates of Bain Capital. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including, without limitation, risks relating to: our ability to grow profitably, consummate the proposed merger with affiliates of Bain Capital and other risks detailed in the Company’s filings with the SEC, including those discussed in the Company’s quarterly report filed with the SEC on Form 10-Q for the quarter ended August 31, 2007.

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, in-process research and development, stock-based compensation expense and, if applicable in the relevant period, unusual items, such as the change-in-control portion of the H3C Equity Appreciation Rights Plan, the inventory-related adjustment portion of the purchase accounting effects of the Company’s acquisition of 49% of H3C, the gains on sales of assets, the gain on an insurance settlement and expenses related to our pending acquisition by affiliates of Bain Capital. 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 (NASDAQ: COMS) is a leading provider of secure, converged voice and data networking solutions for enterprises of all sizes. 3Com offers a broad line of innovative products backed by world class sales,

2

service and support, which excel at delivering business value for its customers. 3Com also includes H3C Technologies Co., Limited (H3C), a China-based provider of network infrastructure products. H3C brings high-performance and cost-effective product development and manufacturing and a strong footprint in one of the world’s most dynamic markets. Through its TippingPoint division, 3Com is a leading provider of network-based intrusion prevention systems that deliver in-depth application protection, infrastructure protection, and performance protection. For further information, please visit www.3com.com, or the press site www.3com.com/pressbox.

# # #

Copyright ^© 2007 3Com Corporation. 3Com, the 3Com logo and TippingPoint are registered trademarks of 3Com Corporation. All other company and product names may be trademarks of their respective holders.

Additional Information About the Transaction and Where to Find It

In connection with the proposed merger, 3Com has filed a proxy statement with the Securities and Exchange Commission. Investors and security holders are advised to read the proxy statement because it contains important information about 3Com and the proposed transaction. Investors and security holders may obtain a free copy of the proxy statement and other documents filed by 3Com at the Securities and Exchange Commission’s Web site at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from 3Com by directing such request to 3Com Corporation 350 Campus Drive, Marlborough, MA 01752-3064 Attention: Investor Relations; Telephone: 508-323-1198. Investors and security holders are urged to read the proxy statement and the other relevant materials before making any voting or investment decision with respect to the proposed transaction. 3Com and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning the interests of 3Com’s participants in the solicitation is set forth in 3Com’s proxy statements and Annual Reports on Form 10-K, previously filed with the Securities and Exchange Commission, and in the proxy statement relating to the merger.

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3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE A

	Three Months Ended
	November 30,			December 1,
	2007			2006
Sales	$	317,801		$	332,976
Cost of sales		165,681			182,825
Gross profit		152,120			150,151
Operating expenses:
Sales and marketing		80,785			76,188
Research and development		52,199			48,151
General and administrative		31,060			22,341
Amortization of intangibles		26,260			12,221
Restructuring charges		3,147			630
Total operating expenses		193,451			159,531
Operating loss		(41,331	)		(9,380	)
Gain (loss) on investments, net		1			(911	)
Interest (expense) income, net		(3,966	)		11,447
Other income, net		10,342			12,616
(Loss) income from operations before income taxes and minority interest of consolidated joint venture		(34,954	)		13,772
Income tax provision		(670	)		(2,315	)
Minority interest of Huawei in the loss (income) of consolidated joint venture (1)		—			(14,973	)
Net loss	$	(35,624	)	$	(3,516	)
Basic and diluted loss per share	$	(0.09	)	$	(0.01	)
Shares used in computing basic and diluted per share amounts		398,989			393,352

⁽¹⁾ Represents Huawei’s 49% interest in the H3C joint venture for the period of minority interest that ended with 3Com’s acquisition of the remaining 49% interest on March 30, 2007.

3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
TABLE B

	November 30,		June 1,
	2007		2007
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	419,143	$	559,217
Notes receivable		70,996		77,368
Accounts receivable, net		127,550		102,952
Inventories, net		93,788		107,988
Other current assets		54,227		50,157
Total current assets		765,704		897,682
Property & equipment, net		63,919		76,460
Goodwill		767,274		766,444
Intangibles, net		322,678		371,289
Other assets		26,747		39,217
Total assets	$	1,946,322	$	2,151,092
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	103,115	$	110,430
Current portion of long-term debt		48,000		94,000
Accrued liabilities and other		366,873		435,638
Total current liabilities		517,988		640,068
Deferred taxes and long-term obligations		14,865		23,725
Long-term debt		288,000		336,000
Stockholders’ equity		1,125,469		1,151,299
Total liabilities and stockholders’ equity	$	1,946,322	$	2,151,092

3Com Corporation
Reconciliation of Non-GAAP Measures
(in thousands, margin and except per-share data)
(unaudited)
TABLE C

	Three Months Ended
	November 30,			December 1,
	2007			2006
GAAP operating loss	$	(41,331	)	$	(9,380	)
Restructuring		3,147			630
Amortization of intangible assets		26,260			12,221
Impacts to cost of sales from purchase accounting adjustments to inventory [a]		5,591			—
Stock-based compensation expense [b]		6,006			6,950
Acquiree expensed acquisition costs [e]		7,600			—
Non-GAAP operating income	$	7,273		$	10,421
GAAP net loss	$	(35,624	)	$	(3,516	)
Restructuring		3,147			630
Amortization of intangible assets		26,260			12,221
Impacts to cost of sales from purchase accounting adjustments to inventory [a]		5,591			—
Stock-based compensation expense [b]		6,006			6,950
Huawei’s 49% minority interest in H3C’s amortization as shown above		—			(4,229	)
Gain on sales of assets [c]		—			(1,300	)
Gain on insurance settlement [d]		—			(3,000	)
Acquiree expensed acquisition costs [e]		7,600			—
Non-GAAP net income	$	12,980		$	7,756
GAAP net loss per share	$	(0.09	)	$	(0.01	)
Restructuring		0.01			0.00
Amortization of intangible assets		0.07			0.03
Impacts to cost of sales from purchase accounting adjustments to inventory [a]		0.01			—
Stock-based compensation expense [b]		0.01			0.02
Huawei’s 49% minority interest in H3C’s amortization as shown above		—			(0.01	)
Gain on sales of assets [c]		—			(0.00	)
Gain on insurance settlement [d]		—			(0.01	)
Acquiree expensed acquisition costs [e]		0.02			—
Non-GAAP net income per share, basic and diluted	$	0.03		$	0.02
Shares used in computing basic per share amounts		398,989			393,352
Shares used in computing diluted per share amounts		404,142			400,335

[a]	Results from our 49% H3C acquisition transaction.
[b]	Stock-based compensation expense is included in the following cost and expense categories by period

	Three Months Ended
	November 30,		December 1,
	2007		2006
Cost of sales		523		383
Sales and marketing		1,418		1,568
Research and development		973		1,545
General and administrative		3,092		3,454

[c]	These gains relate to a patent sale in Q1 fiscal 2008 and a sale of venture funds in Q1 fiscal 2007 and a patent sale in Q2 fiscal 2007.
[d]	This gain relates to insurance proceeds from an insurance settlement for our Hemel facility.
[e]	These expenses relate to the announced acquisition of the Company in August 2007

EX-99.2

Exhibit 99.2

3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended
	November 30,			August 31,			December 1,
	2007			2007			2006
Sales	$	317,801		$	319,434		$	332,976
Cost of sales		165,681			170,498			182,825
Gross profit		152,120			148,936			150,151
Operating expenses:
Sales and marketing		80,785			74,404			76,188
Research and development		52,199			52,310			48,151
General and administrative		31,060			21,478			22,341
Amortization of intangibles		26,260			26,006			12,221
Restructuring charges		3,147			425			630
Total operating expenses		193,451			174,623			159,531
Operating loss		(41,331	)		(25,687	)		(9,380	)
Gain (loss) on investments, net		1			327			(911	)
Interest (expense) income, net		(3,966	)		(3,567	)		11,447
Other income, net		10,342			12,084			12,616
(Loss) income from operations before income taxes and minority interest of consolidated joint venture		(34,954	)		(16,843	)		13,772
Income tax provision		(670	)		(1,811	)		(2,315	)
Minority interest of Huawei in the loss (income) of consolidated joint venture (1)		—			—			(14,973	)
Net loss	$	(35,624	)	$	(18,654	)	$	(3,516	)
Basic and diluted loss per share	$	(0.09	)	$	(0.05	)	$	(0.01	)
Shares used in computing basic and diluted per share amounts		398,989			397,041			393,352

⁽¹⁾ Represents Huawei’s 49% interest in the H3C joint venture for the period of minority interest that ended with 3Com’s acquisition of the remaining 49% interest on March 30, 2007.

Additional Financial Data
(in thousands)
(unaudited)

Sales by Geography (a)

	Three Months Ended
	November 30,		August 31,		December 1,
	2007		2007		2006
China	$	143,107	$	146,754	$	158,276
Europe, Middle East and Africa		73,209		69,662		70,933
North America		52,589		60,018		55,159
Asia Pacific Rim (ex-China)		25,865		23,382		28,312
Latin and South America		23,031		19,618		20,296
Total Sales	$	317,801	$	319,434	$	332,976

(a) DVBU and TippingPoint segment sales are included in geographic categories based on the location of the end customer. H3C segment sales included in the geographic categories are based upon the hub locations of OEM partners in the case of OEM sales and the location of end-customers in the case of direct customer sales.

Sales by Product Category

	Three Months Ended
	November 30,		August 31,		December 1,
	2007		2007		2006
Networking	$	255,533	$	261,976	$	272,852
Security		35,062		31,483		31,582
Voice		16,657		16,321		16,549
Services		9,953		9,030		8,568
Connectivity Products		596		624		3,425
Total Sales	$	317,801		319,434		332,976

3Com Corporation
Segment Reporting
(in thousands)
(unaudited)

	Three Months Ended November 30, 2007
			Data Voice			Tipping					Eliminations /
	H3C		Business Unit			Point		Corporate			Other			Total
Sales	$	182,823	$	139,879		$	25,785				$	(30,686	)[a]	$	317,801
Gross profit		100,673		40,125			17,536		(100	) [b]		(6,114	)[c]		152,120
Operating expenses		72,926		49,610			16,989		11,436	[b]		42,490	[d]		193,451
Operating income (loss)		27,747		(9,485	)		547		(11,536	)		(48,604	)		(41,331	)

	Three Months Ended December 1, 2006
			Data Voice			Tipping						Eliminations /
	H3C		Business Unit			Point			Corporate			Other			Total
Sales	$	190,291	$	144,268		$	22,257					$	(23,840	)[a]	$	332,976
Gross profit		90,715		45,377			15,042			(600	)[b]		(383	)[c]		150,151
Operating expenses		61,051		51,884			17,058			10,750	[b]		18,788	[d]		159,531
Operating income (loss)		29,664		(6,507	)		(2,016	)		(11,350	)		(19,171	)		(9,380	)

[a]	-	eliminations for inter-company revenue during the respective periods.
[b]	-	represents costs not directly attributable to any operating business segment.
[c]	-	includes stock based compensation in all periods plus purchase accounting inventory related adjustments as applicable.
[d]	-	includes: stock-based compensation, amortization, and restructuring in all periods and deal costs where applicable.

3Com Corporation
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)

	Six Month’s Ended
	November 30,			December 1,
	2007			2006
Cash flows from operating activities:
Net loss	$	(54,278	)		(17,584	)
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		69,279			39,789
Loss (gain) on property and equipment disposals		155			(10,920	)
Minority interest		—			23,915
Equity Interest in unconsolidated H3C		9,868			—
Stock-based compensation expense		—			10,237
Gain on investments, net		(185	)		(1,801	)
Deferred income taxes		(1,234	)		(5,907	)
Change in assets and liabilities:
Accounts receivable		(10,418	)		(53,149	)
Inventories		16,863			3,349
Other assets		113			19,925
Accounts payable		(14,642	)		(30,897	)
Intercompany — H3C		—			—
Other liabilities		(68,080	)		18,035
Net cash provided by (used in) operating activities		(52,559	)		(5,008	)
Cash flows from investing activities:
Purchase of investments		—			(224,999	)
Proceeds from maturities and sales of investments		442			269,932
Purchase of property and equipment		(9,746	)		(16,118	)
Proceeds from sale of property and equipment		864			33,108
Net cash (used in) provided by investing activities		(8,440	)		61,923
Cash flows from financing activities:
Issuances of common stock		5,656			12,635
Repurchases of common stock		(1,322	)		(4,708	)
Payments from Long Term Debt		(94,000	)		—
Dividend paid to minority interest shareholder		—			(40,785	)
Net cash used in financing activities		(89,666	)		(32,858	)
Effects of exchange rate changes on cash and equivalents		10,591			4,026
Net change in cash and equivalents during period		(140,074	)		28,083
Cash and equivalents, beginning of period		559,217			501,097
Cash and equivalents, end of period	$	419,143		$	529,180

EX-99.3

EXHIBIT 99.3

H3C Summary Financial Information Provided to Bank Lenders
H3C Holdings Limited
For the Fiscal Q3-2007 Ended September 30, 2007
(unaudited; amounts in thousands)

						Adjusted
		Items	Q3-07			Q3-07			Q2-07
(1	)	Sales	$	185,616		$	185,673		$	184,718
(2	)	Gross Profit	$	96,051		$	101,642		$	88,826
		Gross profit as a percent of sales		51.7	%		54.7	%		48.1	%
(3	)	Consolidated Adjusted EBITDA	$	47,850		$	51,431		$	43,733
		Consolidated Adjusted EBITDA as a percent of sales		25.8	%		27.7	%		23.7	%
(4	)	Taxes	$	605		$	2,714		$	223
(5	)	Deferred income tax	$	1,225		$	(1,048	)	$	1,798
(6	)	Consolidated Net Income	$	4,335		$	30,537		$	(798	)
(7	)	Net Income based on GAAP	$	4,335		$	30,537		$	(798	)
(8	)	Cash, Cash Equivalents and short term investments	$	291,071		$	291,071		$	342,168
(9	)	Net property plant and equipment	$	25,042		$	25,042		$	28,835
(10	)	Consolidated Working Capital	$	(14,055	)	$	(19,819	)	$	(11,784	)
(11	)	Capital expenditure	$	1,572		$	1,572		$	2,839
		Capital Expenditure as a percent of sales		0.8	%		0.8	%		1.5	%
(12	)	Increase in Consolidated Working Capital	$	(2,271	)	$	(8,035	)	$	86,670
(13	)	The result of Consolidated Adjusted EBITDA less Consolidated Working Capital	$	61,905		$	71,250		$	55,517

Remarks:

1) Q3/Q2 sequential growth on sales: 0.1%

2) The Adjusted Q3-07 column indicates the financials after backing out the non-cash purchase accounting entries booked in the quarter that were associated with 3Com’s 49% acquisition transaction as pushed-down by 3Com corporate to H3C Holdings. Major items were a $5.6 million inventory revaluation charge as COGS and a $22.8 million amortization charge on intangible assets.

3) Defined terms have the definitions ascribed to such terms in the Company’s senior secured credit agreement.

The H3C financial information contained in this document is derived from its consolidated H3C entity financials prepared under US Generally Accepted Accounting Principles and differs from the H3C segment financial information reported by 3Com Corporation in its public filings prepared under US Generally Accepted Accounting Principles in that the externally reported segment information includes adjustments for consolidation of the H3C entity and the parent entities, adjustments for any products still in 3Com inventory and adjustments for purchase accounting impacts maintained at the parent level.