March 7, 2003 1:31 PM PST

3Com foresees lower revenue

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Networking company 3Com on Friday said that its revenue will fall below previous projections, reflecting continued weak spending among corporations and telecommunications carriers.

3Com expects to post third-quarter revenue of between $240 million and $245 million, which is less than the company forecast in December. The consensus revenue forecast among financial analysts was about $275 million, according to a poll published by First Call.

The Santa Clara, Calif.-based company blamed the drop in quarter-to-quarter revenue on soft demand in the North American market.

Earlier this week, 3Com announced the sale of its CommWorks carrier equipment division to UTStarcom for $100 million in cash. The move signaled 3Com's intention to focus on selling networking gear exclusively to corporations, rather than to telecom service providers.

In a report earlier this week, Morgan Stanley said the sell-off of CommWorks was a positive step in 3Com's restructuring efforts.

However, the report noted also that "near-term sales weakness and a challenging enterprise spending environment in 2003 keep us from getting more positive."

On top of a stingy spending environment, 3Com, like networking giant Cisco Systems, faces encroaching competition from Dell Computer for switch and router sales. Last year, 3Com cancelled an agreement with Dell, under which the computer maker resold 3Com gear, because of the competition between the two companies.

3Com's share price dropped more than 8 percent to close the trading day Friday at $4.11.


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