3Com Reports 4Q

MARLBOROUGH, Mass. -- 3Com Corporation (NASDAQ: COMS) today reported consolidated financial results for its fourth quarter of fiscal year 2007, which ended June 1, 2007, including the results for its two operating segments, Secure, Converged Networking (SCN) and H3C.

Revenue

Revenue determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was approximately $311 million in the fourth quarter of fiscal 2007, a 22 percent increase compared to the same period in fiscal 2006. This growth is primarily due to the full consolidation of H3C revenue in the current period, which contains an extra month of H3Cs results compared with the prior year period. Revenue grew four percent compared to pro forma revenue in the prior-year period, which includes the results of H3C as if it had been fully consolidated during the prior-year period.

The H3C segment revenue was approximately $176 million, a 13 percent increase over the prior-year quarter pro forma non-GAAP segment results, and the SCN segment revenue was $163 million, a two percent decrease compared to the prior-year fourth quarter. The level of year-over-year decline in SCN decreased during the fourth quarter as compared to the first three quarters of the fiscal year. During the fourth quarter the North America region had seven percent revenue growth over the prior-year period. This was driven by growth in the networking and security categories partially offset by decreased sales of the legacy connectivity products.

Full year GAAP fiscal 2007 revenue was $1.3 billion, a 59 percent increase compared to GAAP fiscal 2006 due primarily to the consolidation of H3C’s results in the current period. On a pro forma basis, assuming H3C had been consolidated from the beginning of the periods, full fiscal year 2007 revenue would have increased 11 percent.Gross Profit and Operating Loss – GAAP Basis

3Com’s gross profit for the fourth quarter of fiscal 2007 was $138 million, or 45 percent of revenue, which is a one percentage point improvement compared to the prior-year quarter, driven primarily by the inclusion of a full three months of H3C in the current period results as well as improvements in the SCN segment. GAAP operating loss was $93 million versus an operating loss of $21 million in the fourth quarter of fiscal 2006. The increase in GAAP operating loss included $91 million in charges related to the closure of the H3C acquisition, including $57 million in current period charges associated with the previously disclosed change-of-control portion of the H3C Equity Appreciation Rights Plan, or EARP. The GAAP operating loss also included $34 million associated with in-process R&D charges for the H3C transaction.

3Com Corp.