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3Com posts third-quarter loss, announces plans to cut costs

SAN JOSE, Calif. (AP) — Struggling network equipment maker 3Com Corp. posted a third-quarter loss Wednesday and announced plans to cut costs further by discontinuing its Internet appliance business.

For the three months ended March 2, the company lost $246 million, or 72 cents a share, on revenue of $629.6 million. That compares with a profit of $506.3 million, or $1.40 a share, on revenue of $1.42 billion in the same period a year ago.

Excluding nonrecurring costs, the company would have posted a loss of $122.8 million, or 36 cents a share, compared with net income of $80.3 million, or 22 cents a share, in the third quarter of 2000.

Analysts surveyed by First Call/Thomson Financial were expecting a loss of 33 cents a share in the third quarter. 3Com and some analysts said, however, that the estimate did not reflect the most recent consensus estimate, which they said predicted a loss of 43 cents a share.

First Call said its survey was updated Monday, but not all analysts submitted updated figures.

"The abruptness and severity of the current technology slowdown has clearly impacted 3Com," said Bruce Claflin, 3Com's chief executive. "3Com is taking immediate steps to reduce costs and achieve profitability."

The company announced plans to restructure its operations, including the discontinuation of Internet appliance products such as the Audrey home Web-access device.

The small TV-like box connected homes to the Internet without the complexities of a personal computer. It included a touch-screen and wireless keyboard for surfing the Web, checking e-mail and setting up calendars.

The company is discontinuing its Kerbango Internet radio service, and said it will tighten its belt in the broadband modem business. In the past quarter, a slowdown in high-speed Internet access deployment has led to inventory buildup and price erosion, 3Com said.

In all, the company plans to save $1 billion annually in a series of cost-cutting moves to regain positive cash flow by the second quarter. It has not turned a profit since last year, when it spun off the division that makes Palm handheld computers.

Earlier in the quarter, 3Com unveiled $250 million in cuts, which included slashing 1,200 jobs. On Wednesday, Claflin said the company would trim another $250 million in its consumer business.

The company said it would also save an additional $500 million annually by improving the efficiency of its assets. Details of the cuts, including layoffs, were to be revealed as they are implemented, Claflin said.

"It is reasonable to expect we will be taking substantive reductions over the course of the fiscal year," he said.

At the end of the third quarter, the company had about 8,400 employees.