3Com's losses grow to $166M; Marlboro firm's revenue rises.

Byline: Martin Luttrell

MARLBORO - Computer networking equipment maker 3Com Corp. posted higher revenues for the fourth quarter, but a wider net loss from a write-down of its TippingPoint security division.

The net loss in the quarter was $166.7 million, or 41 cents per share, compared with a net loss of $66.2 million, or 17 cents per share, in the fourth quarter of fiscal 2007, the company reported yesterday.

In the quarter that ended May 30, 3Com recorded a noncash goodwill impairment charge of $158 million, or 39 cents per share, arising from the company's 2005 acquisition of TippingPoint, which makes security products.

3Com said its recent stock price decline triggered an impairment evaluation required by accounting regulations. Shares of 3Com have fallen 47 percent this year.

Revenue in the quarter was $321.3 million, compared to revenue of $310.9 million in the corresponding period in 2007, a 3 percent increase. For the full year, revenue was $1.29 billion, compared to full-year fiscal 2007 revenue of $1.27 billion, an increase of 2 percent, the company said.

"Our business is moving in the right directions," Chief Executive Officer Robert Y.L. Mao told analysts during a conference call yesterday. 3Com has not posted a profit since 2000.

In 2008, the company made progress in key areas, said Mr. Mao, who took over in April. He said revenues grew year-over-year in almost every region and margins increased. Mr. Mao, who is based in China, said his goals include integration of 3Com worldwide operations, increasing market share and generating cash.

For fiscal 2008, 3Com incurred a net loss of $228.8 million or 57 cents a share, compared with a net loss in fiscal year 2007 of $88.6 million, or 22 cents a share. The increase in the net loss is primarily due to the inclusion of the impairment charge, the company said.

3Com has reached market share parity in China with Cisco Systems Inc., the world's largest networking equipment maker, Mr. Mao said.

"We can leverage our leadership position in China for overall competitiveness," he said.

He noted that the company has increased revenues in all regions except North America.

3Com bought out Huawei Technology Co.'s 49 percent stake in Huawei-3Com for $882 million in 2006. Shenzhen, China-based Huawei can sell competing products in that country in September, according to the terms of their agreement.

In China, H3C produced higher revenues, and was 3Com's sole entry to the Chinese market, Mr. Mao said. 3Com is now seeing a downward trend with Huawei, which last year accounted for 30 percent of its sales. Huawei now accounts for about 20 percent of sales.

During the conference call, 3Com officials made no reference to a failed $2.2 billion buyout by Bain Capital Partners and Huawei. In March, the three companies withdrew a request for approval before the Committee on Foreign Investment in the United States.

The CFIUS panel had expressed concern that 3Com's TippingPoint security software, which is used by U.S. government agencies, may fall into the hands of the Chinese military. 3Com is seeking a $66 million breakup fee from Bain.

Shares of 3Com fell 2 cents yesterday to close at $2.37 on the Nasdaq Stock Market.

ART: PHOTO

CUTLINE: Mr. Mao