3Com Plunges on Lowered Outlook

3Com (Nasdaq: COMS) was down US$1.69 at $7.44 in morning trading Thursday after the networking equipment maker said revenue and earnings for the third quarter ending March 2nd will be “substantially lower” than previously thought.

3Com said that U.S. economic conditions and a prolonged slump in the telecom industry have reduced demand for products in most of its businesses.

As a result, revenue for the quarter will range between $625 million and $640 million, with a loss before restructuring and other charges of $135 million to $145 million.

Reports said that the loss is double the amount company officials previously projected.

The economic slowdown is also resulting in a shift in demand to lower-margin products, lower prices for consumer broadband modem products, and higher costs, 3Com said.

“The sudden and substantial slowing of the U.S. economy dramatically impacted the company’s revenue and gross margin performance during the quarter,” said president and chief executive officer Bruce Claflin.

“3Com is committed to achieving a lower cost structure based on the realities of the current economic climate, while continuing to invest for long-term profitable growth,” Claflin said.

Earlier this week, 3Com said it would lay off 1,200 people as part of a plan to lower costs. The cuts will be across the board, and are designed to help the company focus on work aimed at producing better financial returns.

3Com said it plans to cut spending on employment, discretionary items, products and equipment.

“3Com will continue to report significant milestones towards this end as it focuses company resources on markets, technologies and products where it can lead,” the company said in announcing the plan.

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