3Com’s enterprise network revenues drop

Against the backdrop of its pending enterprise joint venture with Huawei Technologies, 3Com this week revealed that its enterprise network revenue was down 21% from quarter to quarter, to $130 million.

Overall, 3Com’s revenue was $175 million in its fourth fiscal quarter, which ended May 30, and its net loss was $38 million. This is much better than the previous quarter, when the company’s loss was $79 million. Still, 3Com earlier this month announced it would lay off 10% of its workforce.

3Com said its 10/100M bit/sec Ethernet switches didn’t do well, and blamed much of the drop in enterprise network revenue on a drop in overseas business. In Asia, sales were hurt by the outbreak of SARS and the announcement of the company’s joint venture with Huawei, which resulted in some “channel disruption.” Plus, half of 3Com’s business is in Europe, so a slowdown there has had a bad effect on 3Com, too.

3Com also noted that 10/100M bit/sec Ethernet switches have been under tremendous price pressure. The company says it is changing its pricing approach, with lower list prices instead of one-time promotions.

3Com recently brought out an enterprise switch that it is OEMming from Huawei. This is really a temporary arrangement until the joint venture between the two companies becomes fully operational. 3Com says it expects that to happen in the second fiscal quarter, which puts it in the fall, and said that the joint venture’s IT requirements and financial reporting requirements need to be addressed. Plus, approval from the Chinese government is needed.

In the future, 3Com will buy from the joint venture the switch it is currently OEMming from Huawei, among other products.