EX-99.1 2 b80245exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(LOGO)
FOR IMMEDIATE RELEASE
For more information contact:
     
Investor Relations
  Media Relations
Gene Skayne
  Anastasia Efstratios
508.323.1080
  781.782.5873
gene_skayne@3com.com
  anastasia_efstratios@lpp.com
3Com Reports Results for Third Quarter Fiscal Year 2010
MARLBOROUGH, MASS.—March 30, 2010—3Com Corporation (Nasdaq: COMS) today reported financial results for its fiscal 2010 third quarter, which ended February 26, 2010. Revenue in the quarter was $345.9 million, compared to revenue of $324.7 million in the corresponding period in fiscal year 2009, a 6.5 percent increase.
          All regions delivered double-digit revenue growth over the same fiscal year 2009 quarter, except China. Total revenue in our China based operations was down 1.3 percent from the same prior year period, primarily the result of a 77.9 percent decline in sales to Huawei, which were $12.4 million in the quarter. China direct sales were $165.9 million in the quarter, a 29.7 percent increase over the corresponding prior year period.
          3Com’s gross margin was 60.4 percent in the third quarter of fiscal year 2010, compared with gross margin of 57.2 percent in third quarter of fiscal year 2009. On a non-GAAP basis, gross margin was 60.5 percent in the third quarter, compared with 57.4 percent in the same prior year period.
          3Com’s operating profit margin was 6.5 percent in the quarter, up from 0.5 percent in the corresponding prior year period. On a non-GAAP basis, operating profit margin was 13.9 percent in the third quarter, compared with 11.3 percent in the third quarter of the prior year.
          Net income in the quarter was $41.4 million, or $0.10 per diluted share, compared with net income of $1.9 million, or $0.00 per diluted share in the third quarter of the prior fiscal year. On a non-GAAP basis, third quarter fiscal year 2010 net income was $67.2 million, or $0.16 per diluted share, compared with net income of $49.1 million, or $0.13 per diluted share, in the corresponding prior year period.
          3Com generated $89.7 million in cash from operations in the quarter. On a year-to-date basis, 3Com generated $224.8 million in cash from operations. 3Com’s cash and equivalents and short term investments balance at February 26, 2010 was $795.0 million.

 

 

3Com Reports Results for Third Quarter Fiscal 2010, p. 2
          “We are very pleased with 3Com’s continued strong performance in the quarter,” said Bob Mao, 3Com’s Chief Executive Officer. “We delivered strong sequential and year-over-year revenue growth while improving gross and operating margins, and generating almost ninety million dollars in cash from operations.” Bob continued “I am particularly gratified by our China direct business, which achieved year-over-year growth of almost thirty percent, essentially offsetting the reduced sales to Huawei.”
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 goals. 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, expand outside of China, maintain and expand in China, improve expense controls while making investments to grow 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 fiscal quarter ended November 27, 2009.
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© 2010 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 Reports Results for Third Quarter Fiscal 2010, p. 3
3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE A
                                         
    Three Months Ended     Nine Months Ended  
    February 26,     November 27,     February 27,     February 26,     February 27,  
    2010     2009     2009     2010     2009  
Sales
   $ 345,880     $ 322,164     $ 324,707     $ 958,546     $ 1,021,919  
Cost of sales
     137,086       128,542       138,878       389,559       446,671  
 
                              
 
                                        
Gross profit
     208,794       193,622       185,829       568,987       575,248  
 
                                        
Operating expenses (income):
                                        
Sales and marketing
     100,543       93,754       85,541       279,085       262,943  
Research and development
     47,997       41,400       45,229       128,365       141,630  
General and administrative
     21,323       25,786       27,593       68,479       80,699  
Amortization of intangibles
     16,506       16,755       23,106       50,332       73,330  
Patent dispute resolution
     —       —       —       —       (70,000 )
Restructuring charges
     47       1,552       2,860       2,732       7,361  
 
                              
Operating expenses, net
     186,416       179,247       184,329       528,993       495,963  
 
                              
 
                                        
Operating income
     22,378       14,375       1,500       39,994       79,285  
 
                                        
Interest income (expense), net
     683       (1,922 )     (3,333 )     (2,327 )     (5,131 )
Other income, net
     19,676       5,920       16,528       37,143       45,298  
 
                              
 
                                        
Income before income taxes
     42,737       18,373       14,695       74,810       119,452  
 
                                        
Income tax (provision) benefit
     (1,346 )     1,619       (12,828 )     (5,966 )     (24,878 )
 
                              
 
                                        
Net income
   $ 41,391     $ 19,992     $ 1,867     $ 68,844     $ 94,574  
 
                              
 
                                        
Basic income per share
   $ 0.10     $ 0.05     $ 0.00     $ 0.17     $ 0.24  
 
                              
 
                                        
Diluted income per share
   $ 0.10     $ 0.05     $ 0.00     $ 0.17     $ 0.24  
 
                              
 
                                        
Shares used in computing basic per share amounts
     396,253       392,688       384,679       392,905       393,868  
 
                                        
Shares used in computing diluted per share amounts
     411,546       403,501       386,377       403,771       395,232  

 

 

3Com Reports Results for Third Quarter Fiscal 2010, p. 4
3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
TABLE B
                 
    February 26,     May 29,  
    2010     2009  
ASSETS
                
 
                
Current assets:
                
Cash and equivalents
   $ 795,014     $ 545,818  
Short term investments
     —       98,357  
Notes receivable
     26,688       40,590  
Accounts receivable, net
     129,998       112,771  
Inventories, net
     114,972       90,395  
Other current assets
     48,977       56,982  
 
            
 
                
Total current assets
     1,115,649       944,913  
 
                
Property & equipment, net
     36,747       40,012  
Goodwill
     609,297       609,297  
Intangibles, net
     148,432       198,624  
Deposits and other assets
     22,823       22,511  
 
            
 
                
Total assets
   $ 1,932,948     $ 1,815,357  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Accounts payable
   $ 74,907     $ 68,350  
Current portion of long-term debt
     48,000       48,000  
Accrued liabilities and other
     484,388       394,103  
 
            
 
                
Total current liabilities
     607,295       510,453  
 
                
Deferred taxes and long-term obligations
     37,218       40,729  
Long-term debt
     64,000       152,000  
Stockholders’ equity
     1,224,435       1,112,175  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 1,932,948     $ 1,815,357  
 
            

 

 

3Com Reports Results for Third Quarter Fiscal 2010, p. 5
3Com Corporation
Reconciliation of Non-GAAP Financial Measures
(in thousands, except margin and per-share data)
(unaudited)
TABLE C
                                         
    Three Months Ended     Nine Months Ended  
    February 26,     November 27,     February 27,     February 26,     February 27,  
    2010     2009     2009     2010     2009  
GAAP gross margin
     60.4 %     60.1 %     57.2 %     59.4 %     56.3 %
Stock-based compensation expense [b]
     0.1 %     0.2 %     0.2 %     0.1 %     0.2 %
 
                              
Non-GAAP gross margin
     60.5 %     60.3 %     57.4 %     59.5 %     56.5 %
 
                              
 
                                        
GAAP operating income
   $ 22,378     $ 14,375     $ 1,500     $ 39,994     $ 79,285  
Restructuring
     47       1,552       2,860       2,732       7,361  
Amortization of intangible assets
     16,506       16,755       23,106       50,332       73,330  
Patent dispute resolution [a]
     —       —       —       —       (70,000 )
Stock-based compensation expense [b]
     6,461       6,233       5,663       17,579       17,743  
Acquiree expensed acquisition costs [c]
     2,802       4,552       —       7,354       —  
TippingPoint special admin costs [d]
     —       —       —       —       800  
Legal contingency accrual [e]
     —       —       2,400       —       2,400  
Impairment of property and equipment [f]
     —       —       1,150       —       1,150  
 
                              
Non-GAAP operating income
   $ 48,194     $ 43,467     $ 36,679     $ 117,991     $ 112,069  
 
                              
 
                                        
GAAP operating profit margin
     6.5 %     4.5 %     0.5 %     4.2 %     7.8 %
Restructuring
     0.0 %     0.5 %     0.9 %     0.3 %     0.7 %
Amortization of intangible assets
     4.8 %     5.2 %     7.1 %     5.3 %     7.2 %
Patent dispute resolution [a]
     —       —       —       —       -6.8 %
Stock-based compensation expense [b]
     1.9 %     1.9 %     1.7 %     1.8 %     1.7 %
Acquiree expensed acquisition costs [c]
     0.7 %     1.4 %     —       0.7 %     —  
TippingPoint special admin costs [d]
     —       —       —       —       0.1 %
Legal contingency accrual [e]
     —       —       0.7 %     —       0.2 %
Impairment of property and equipment [f]
     —       —       0.4 %     —       0.1 %
 
                              
Non-GAAP operating profit margin
     13.9 %     13.5 %     11.3 %     12.3 %     11.0 %
 
                              
 
                                        
GAAP net income
   $ 41,391     $ 19,992     $ 1,867     $ 68,844     $ 94,574  
Restructuring
     47       1,552       2,860       2,732       7,361  
Amortization of intangibles
     16,506       16,755       23,106       50,332       73,330  
Patent dispute resolution [a]
     —       —       —       —       (70,000 )
Stock-based compensation expense [b]
     6,461       6,233       5,663       17,579       17,743  
Acquiree expensed acquisition costs [c]
     2,802       4,552       —       7,354       —  
TippingPoint special admin costs [d]
     —       —       —       —       800  
Legal contingency accrual [e]
     —       —       2,400       —       2,400  
Impairment of property and equipment [f]
     —       —       1,150       —       1,150  
Tax adjustment related to resolution of 2008 tax rate in PRC [g]
     —       (10,801 )     —       (10,801 )     —  
Charge related to change in tax rates [h]
             —       12,083       —       12,083  
 
                              
Non-GAAP net income
   $ 67,207     $ 38,283     $ 49,129     $ 136,040     $ 139,441  
 
                              
 
                                        
GAAP net income per share
   $ 0.10     $ 0.05     $ 0.00     $ 0.17     $ 0.24  
Restructuring
     0.00       0.00       0.01       0.01       0.02  
Amortization of intangibles
     0.04       0.04       0.06       0.12       0.19  
Patent dispute resolution [a]
     —       —       —       —       (0.18 )
Stock-based compensation expense [b]
     0.01       0.02       0.02       0.04       0.04  
Acquiree expensed acquisition costs [c]
     0.01       0.01       —       0.02       —  
TippingPoint special admin costs [d]
     —       —       —       —       0.00  
Legal contingency accrual [e]
     —       —       0.01       —       0.01  
Impairment of property and equipment [f]
     —       —       0.00       —       0.00  
Tax adjustment related to resolution of 2008 tax rate in PRC [g]
     —       (0.03 )     —       (0.02 )     —  
Charge related to change in tax rates [h]
     —       —       0.03       —       0.03  
 
                              
Non-GAAP net income per share, diluted
   $ 0.16     $ 0.09     $ 0.13     $ 0.34     $ 0.35  
 
                              
Shares used in computing diluted per share amounts
     411,546       403,501       386,377       403,771       395,232  
 
[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     Nine Months Ended  
    February 26,     November 27,     February 27,     February 26,     February 27,  
    2010     2009     2009     2010     2009  
Cost of sales
     557       591       596       1,688       1,916  
Sales and marketing
     2,147       2,081       1,599       5,818       4,970  
Research and development
     538       423       768       1,437       2,545  
General and administrative
     3,219       3,138       3,144       8,636       8,756  
 
Note:   $444 thousand of stock-based compensation in the three and nine months ended February 27, 2009 has been recorded to restructuring expense
 
[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]     Accruals for contingencies relating to patent litigation.
 
[f]     Impairment charge related to the Company’s land in Hemel. UK.
 
[g]     We recorded a favorable tax adjustment, reflecting final resolution of our calendar year 2008 tax rate in China.
 
[h]     These expenses result from a change in the statutory rate used to compute the income tax provision in the PRC.
Note:     Included in the three months ended February 26, 2010 is a $9.9 million tax benefit related to the change of our PRC statutory tax rate from 15% to 10% as our H3C subsidiary was granted Key Software Development Enterprise status for calendar year 2009.