Network equipment maker 3Com Corp. (Nasdaq: COMS - news ), fighting to recover after the telecom sector downturn this year, posted a narrower-than-expected second-quarter loss on Tuesday and said it hopes to return to profitability by the fourth quarter.
Santa Clara, California-based 3Com posted a loss before charges of $47 million, or 14 cents a share in the quarter ended Nov. 30, compared with a loss of $51.1 million, or 15 cents a share in the year-earlier period.
Company officials attributed the better-than-expected results to cost-cutting efforts and rising revenues.
Analysts surveyed by research firm Thomson Financial/First Call had on average expected 3Com to post a loss of 22 cents, with loss estimates ranging from 17 cents to 28 cents.
The narrowing loss was a sign that 3Com is positioned to work toward profitability, executives said, while citing concerns about the slow economy and the depressed telecom market.
"Each one of our businesses had growth," 3Com Chief Executive Bruce Claflin told Reuters. "Our enterprise business grew 1 percent. Our PC card business grew 6 percent. And CommWorks, which targets carriers and service providers, grew 8 percent."
The gains helped lift 3Com's revenue to $394 million from $390 in the prior quarter, the first sequential revenue gain for 3Com since it announced restructuring plans in January.
Claflin also credited $200 million in cost cuts for helping second-quarter results, but said the company has more room to pare expenses, including more jobs.
3Com, which launched a major restructuring to offset sagging revenues during the telecom downturn, aimed to end November with 6,000 employees, roughly half its work force of a year earlier.
3Com Chief Financial Officer Michael Rescoe told a conference call the company hoped to return to profitability in its fiscal fourth quarter, which ends May 31, 2002.
The company, a pioneer of the Ethernet networking standard, last saw profitability in the third quarter of fiscal 2000 which ended in February that year.
Analyst Michael Cristinziano of Gerard Klauer Mattison & Co. said 3Com may be too optimistic about its turnaround.
"Management is doing a good job managing new business, but it doesn't seem to be enough" to compensate for the continued downturn in spending on information technology, Cristinziano said.
3Com shares, which trade on the Nasdaq, closed on Tuesday at $5.31, up 27 cents, or 5.4 percent. The shares were 58 percent higher than their year-low of $3.37 on Sept. 17.
By contrast, the Nasdaq Composite index ( IXIC - news ) closed at 2,004.76, up 45 percent from its year-low of 1,387.06 on Sept. 21.