3Com justified its $6.6 million acquisition of US Robotics with sparkling first quarter results, as low costs and huge turnover helped it outperform analyst expectations.
Although the company lost $146.8 million in the quarter to 31 August - compared to $152 million profit in Q1 1997 - it would have made a profit of $172.2 million without a $426 million acquisition charge for the USR merger. Analysts had expected bigger losses and higher costs - even 3Com had warned its charges could damage short term results. Turnover rose by 28 per cent from $1.25 million to $1.6 billion over the same period.
Improving European sales also helped the merged company and chief executive Eric Benhamou said: "Our customers are beginning to see the benefits of our expanded product line, new products, broader distribution capabilities and operating efficiencies. As a result, our first quarter as a combined company has led to increased market share and sequentially improved operating margins."
Analysts said 3Com has coped well with the costs and pitfalls of a giant merger and has fought well against Intel, Cisco Systems and Bay Networks in the competitive networking markets. One said the company should continue to exceed expectations during its fiscal 1998. Another said its ATM business is strong, its systems business is surviving pressure from Cisco, its hub and network card sales have not fallen after Intel?s price cuts and its switching business is very impressive.
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