3Com plans to cut 1200 jobs...

The 3Com Corporation, the struggling maker of computer networking equipment, announced today that it would eliminate 1,200 jobs as part of an effort to restore the company to profitability.

The cutback, which had been foreshadowed four days before Christmas, is part of an attempt to save more than $200 million in operating costs this year.

3Com, based in Santa Clara, Calif., said it would lay off 900 salaried employees, or nearly 10 percent of its 9,200-member work force. The company will also let go 300 of its 2,500 contract and temporary workers.
"In light of the U.S. economic downturn and turmoil in the telecommunications industry, I announced in December a global cost reduction initiative," Bruce Claflin, 3Com's chief executive, said in a statement. "3Com will focus all of its resources on work critical to market leadership and superior financial returns."
Brian Johnson, a 3Com spokesman, said across-the-board job cuts would affect workers in the United States, Asia and Europe. Many of those employees got word of their dismissals today.

3Com was among the first networking companies to warn of 2001 layoffs, but several other industry leaders swung the ax first. Within the last month, Nortel Networks and Lucent Technologies each outlined plans to eliminate as many as 10,000 jobs, nearly 10 percent of their work forces, through layoffs and attrition. Both companies cited declining sales and profits, complaints common to 3Com as well.
On Dec. 21, 3Com reported a net loss of $142.4 million for its fiscal second quarter, ended Dec. 1. Though the loss was slimmer than Wall Street's lowered estimates, the quarter was the third consecutive one to show a loss.

At that time, Mr. Claflin said that 3Com intended to save $200 million to $250 million annually by curtailing travel expenses, property maintenance and the use of consultants. He projected then that the company would turn an operating profit in its first fiscal quarter, which ends in August.

Mr. Claflin said then that 3Com would take a one-time charge of $40 million to $60 million during the current quarter, which ends March 2, to accommodate the restructuring.

The mass layoffs are 3Com's second round in a year. In March 2000, the company announced plans to sell or close several of its slower-growing units, including its dial-up modem and high-end network businesses, and accelerated the spinoff of its Palm hand-held computer division. The move left 3Com a much smaller company, focused on broadband and wireless connectivity devices for consumers and small businesses.
By the end of the last quarter, employee numbers had fallen to 9,200 from 11,800. Today's announced cuts will reduce the work force to 8,300 full-time employees, Mr. Johnson said.

Workers will receive severance packages based on the length of their tenure, he said, and all will receive some help finding new jobs.

Michael Cristinziano, a senior vice president with Gerard Klauer Mattison & Company, said 3Com's layoffs should come as no surprise.

"The real question is: Are they cutting too thin or is it a sign of more to come?" asked Mr. Cristinziano, who has a 12-month target of $13 on 3Com shares and rates them outperform. "The swing factor will be the new products."

He was referring to 3Com's new Internet appliances, including the Audrey and Kerbango models, and its new services business, the CommWorks Corporation. 3Com created CommWorks, which builds networks for telephone companies and Internet service providers, in December.

"Until those really start to ramp," he said, "I don't expect the company will grow."