Enterprise networking solutions provider 3Com Corp. (COMS) on Thursday reported a sharp year-over-year decline in profit for the first quarter of fiscal 2010, as the year-ago quarter included a significant gain from a favorable patent dispute resolution. Excluding items, the company's quarterly earnings per share dropped 27%, but topped analysts' expectations by three cents. Quarterly sales declined 15.2%, yet beat consensus estimate.
In a statement, chief executive officer, Bob Mao said, "We are pleased with 3Com's start to our new fiscal year. We had a very good quarter, delivering solid revenue performance, improving gross margin over the prior year, and continuing to generate cash from operations."
The Marlborough, Massachusetts-based company reported net income of $7.46 million or $0.02 per share for the first quarter, sharply lower than $79.84 million or $0.20 per share in the prior-year quarter.
The results for the latest quarter include $17.07 million or $0.04 per share of amortization of intangibles and stock-based compensation expenses of $4.89 million or $0.02 per share. The year-ago quarter results included $70.0 million or $0.17 per share of favorable patent dispute resolution with Realtek, $25.16 million or $0.06 per share of amortization of intangibles and stock-based compensation expenses of $6.44 million or $0.02 per share.
Excluding one-time items, net income for the quarter declined to $30.55 million or $0.08 per share from $43.44 million or $0.11 per share in the year-ago quarter. On average, four analysts polled by Thomson Reuters expected the company to report earnings of $0.05 per share for the first quarter. Analysts estimates typically exclude special items.
3Com, which competes with companies such as Cisco Systems Inc. (CSCO), said sales for the quarter declined 15.2% to $290.50 million from $342.65 million in the same quarter last year, but topped five Wall Street analysts' consensus estimate of 278.15 million.
Operating income for the first quarter plunged to $3.24 million from $73.38 million in the prior-year quarter, and gross profit for the quarter was $166.57 million, down from $189.63 million in the year-ago quarter.
Total operating expenses for the quarter surged to $163.33 million from $116.24 million in the comparable quarter a year ago. Expenses include research and development expenses of $38.97 million, lower than $47.15 million last year, and general and administrative expenses of $21.37 million, down from $24.45 million in the earlier year.
3Com is a $1.3 billion global enterprise networking solutions provider and operates through 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.
COMS closed Wednesday's regular trading session at $4.78, down $0.02 on a volume of 4.09 million shares, lower than the three-month average volume of 5.68 million shares. In the past 52-week period, the stock has been trading in a range of $1.43 to $5.22.
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