EX-99.1 2 b693263cexv99w1.htm EX-99.1 TEXT OF PRESS RELEASE, DATED MARCH 24, 2008 exv99w1
 

EXHIBIT 99.1
(3COM LOGO)
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 THIRD QUARTER FISCAL YEAR 2008 RESULTS
MARLBOROUGH, MASS. — March 24, 2008 — 3Com Corporation (NASDAQ: COMS) today reported financial results for its fiscal 2008 third quarter, which ended February 29, 2008. Revenue in the quarter was $336.4 million compared to revenue of $323.4 million in the corresponding period in fiscal 2007, a 4 percent increase.
Net loss in the quarter was $7.8 million, or $0.02 per share, compared with a net loss of $4.8 million, or $0.01 per share, in the third quarter of fiscal year 2007. The net loss increase resulted primarily from a $6.1 million non-cash deferred tax liability provision, which is expected to be reversed in coming quarters. On a non-GAAP basis, net income was $34.2 million, or $0.08 per diluted share, compared with net income of $11.0 million, or $0.03 per diluted share for the third quarter of fiscal year 2007.
In the third quarter, 3Com generated $44.1 million in cash from operations.
“On an operational basis we had a very strong quarter,” said Edgar Masri, 3Com President and CEO. “In the third quarter, our revenues were at the highest level since we began consolidating H3C revenue; our gross margins reached a record high of 53 percent; we

 

 

generated a non-GAAP net income margin of 10 percent; and we were cash-flow positive for the second consecutive quarter. We still have more work to do, but I am very pleased with the continued progress we are making in building a growing and profitable business.”
For additional financial information, please refer to the Investor Relations section of the 3Com 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 belief about a reversal in a deferred tax liability provision. 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 and receive approval for lower tax rates under PRC law 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 November 30, 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 a potential change in our tax status in the PRC, 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, 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, cost-effective product development 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 © 2008 3Com Corporation. 3Com, the 3Com logo and TippingPoint are registered trademarks and H3C is a trademark of 3Com Corporation or its wholly owned subsidiaries. All other company and product names may be trademarks of their respective holders.

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3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE A
                 
    Three Months Ended
    February 29,     March 2,  
    2008     2007  
Sales
   $ 336,390     $ 323,441  
Cost of sales
     156,716       170,004  
 
            
 
        
Gross profit
     179,674       153,437  
 
        
Operating expenses:
                
Sales and marketing
     82,428       77,338  
Research and development
     50,530       48,419  
General and administrative
     26,268       22,466  
Amortization of intangibles
     25,778       10,228  
In-process research and development
     —       1,700  
Restructuring charges
     736       2,221  
 
            
Total operating expenses
     185,740       162,372  
 
            
 
        
Operating loss
     (6,066 )     (8,935 )
 
        
Gain (loss) on investments, net
     23       (582 )
Interest (expense) income, net
     (2,879 )     11,265  
Other income, net
     10,568       9,637  
 
            
 
        
Income from operations before income taxes and minority interest of consolidated joint venture
     1,646       11,385  
 
        
Income tax provision
     (9,486 )     (1,374 )
Minority interest of Huawei in the income of consolidated joint venture (1)
     —       (14,790 )
 
            
 
        
Net loss
   $ (7,840 )   $ (4,779 )
 
            
 
        
Basic and diluted loss per share
   $ (0.02 )   $ (0.01 )
 
            
 
        
Shares used in computing basic and diluted per share amounts
     400,142       394,351  
 
(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 29, 2007.

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3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
TABLE B
                 
    February 29,     June 1,  
    2008     2007  
ASSETS
                
Current assets:
                
Cash and equivalents
   $ 466,030     $ 559,217  
Notes receivable
     106,595       77,368  
Accounts receivable, net
     142,309       102,952  
Inventories, net
     93,668       107,988  
Other current assets
     46,601       50,157  
 
            
 
                
Total current assets
     855,203       897,682  
 
                
Property & equipment, net
     56,766       76,460  
Goodwill
     767,274       766,444  
Intangibles, net
     300,307       371,289  
Deposits and other assets
     26,757       39,217  
 
            
 
                
Total assets
   $ 2,006,307     $ 2,151,092  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 104,489     $ 110,430  
Current portion of long-term debt
     48,000       94,000  
Accrued liabilities and other
     414,511       435,638  
 
            
 
                
Total current liabilities
     567,000       640,068  
 
                
Deferred taxes and long-term obligations
     16,839       23,725  
Long-term debt
     288,000       336,000  
Stockholders’ equity
     1,134,468       1,151,299  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 2,006,307     $ 2,151,092  
 
            
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3Com Corporation
Reconciliation of Non-GAAP Measures
(in thousands, margin and except per-share data)
(unaudited)
TABLE C
                 
    Three Months Ended  
    February 29,     March 2,  
    2008     2007  
GAAP operating loss
   $ (6,066 )   $ (8,935 )
Restructuring
     736       2,221  
Amortization of intangible assets
     25,778       10,228  
In-process research and development [a]
     —       1,700  
Impacts to cost of sales from purchase accounting adjustments to inventory [b]
     57       —  
Stock-based compensation expense [c]
     5,544       4,896  
Acquiree expensed acquisition costs [d]
     2,988       —  
 
            
Non-GAAP operating income
   $ 29,037     $ 10,110  
 
            
 
                
GAAP net loss
   $ (7,840 )   $ (4,779 )
Restructuring
     736       2,221  
Amortization of intangible assets
     25,778       10,228  
In-process research and development [a]
     —       1,700  
Impacts to cost of sales from purchase accounting adjustments to inventory [b]
     57       —  
Stock-based compensation expense [c]
     5,544       4,896  
Huawei’s 49% minority interest in H3C’s amortization as shown above
     —       (3,219 )
Acquiree expensed acquisition costs [d]
     2,988       —  
Gain on sales of assets [e]
     (1,225 )     —  
Loss on insurance settlement [f]
     2,066       —  
Charge related to change in tax status [g]
     6,056       —  
 
            
Non-GAAP net income
   $ 34,160     $ 11,047  
 
            
 
                
GAAP net loss per share
   $ (0.02 )   $ (0.01 )
Restructuring
     0.00       0.01  
Amortization of intangible assets
     0.06       0.03  
In-process research and development [a]
     —       0.00  
Impacts to cost of sales from purchase accounting adjustments to inventory [b]
     0.00       —  
Stock-based compensation expense [c]
     0.01       0.01  
Huawei’s 49% minority interest in H3C’s amortization as shown above
     —       (0.01 )
Acquiree expensed acquisition costs [d]
     0.01       —  
Gain on sales of assets [e]
     (0.00 )     —  
Gain on insurance settlement [f]
     0.01       —  
Charge related to change in tax status [g]
     0.01       —  
 
            
Non-GAAP net income per share, diluted
   $ 0.08     $ 0.03  
 
            
Shares used in computing diluted per share amounts
     404,502       400,146  
 
                
GAAP net loss margin
     -2.3 %     -1.5 %
Restructuring
     0.2 %     0.7 %
Amortization of intangible assets
     7.7 %     3.2 %
In-process research and development [a]
     0.0 %     0.5 %
Impacts to cost of sales from purchase accounting adjustments to inventory [b]
     0.0 %     0.0 %
Stock-based compensation expense [c]
     1.6 %     1.5 %
Huawei’s 49% minority interest in H3C’s amortization as shown above
     0.0 %     -1.0 %
Acquiree expensed acquisition costs [d]
     0.9 %     0.0 %
Gain on sales of assets [e]
     -0.4 %     0.0 %
Loss on insurance settlement [f]
     0.6 %     0.0 %
Charge related to change in tax status [g]
     1.8 %     0.0 %
 
            
Non-GAAP net income margin
     10.1 %     3.4 %
 
            
 
[a]   In-process research and development from our acquisition of Roving Planet.
 
[b]   Results from our 49% H3C acquisition transaction.
 
[c]   Stock-based compensation expense is included in the following cost and expense categories by period:
                 
    Three Months Ended
    February 29,   March 2,
    2008   2007
Cost of sales
     496       418  
Sales and marketing
     1,753       1,553  
Research and development
     1,100       1,060  
General and administrative
     2,195       1,865  
[d]   These expenses relate to the announced acquisition of the Company in September 2007
 
[e]   The gain relates to a patent sale in Q3 fiscal 2008
 
[f]   This loss relates to the recording of final costs associated with our Hemel facility.
 
[g]   This expense relates $6.1 million non-cash deferred tax liability provision

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