3COM Pulls A Rabbit From Its Hat (COMS)

This morning we are seeing some news out of 3Com Corporation (Nasdaq: COMS) which many may have guessed wouldn’t be possible.  The networking company raised guidance previously provided for the quarter-end of August 29, 2008.  The company now sees $335 to $340 million in revenues, above previous guidance of $325 to $330 million and above First Call estimates of $327.7 million.  The new non-GAAP guidance is $28 to $32 Million and $0.06 to $0.08 EPS, above prior targets of $0.03 to $0.05 EPS and above First Call estimates of $0.04 EPS.

3Com said this is primarily due to stronger performance from its Chinaoperations.  It also excludes the one-time impact of the company’sagreement with Realtek in resolution of a patent dispute.  The bulk ofthis is due to stronger sales to Huawei, although 3Com does stillmaintain its prior stance that sales to Huawei will decline over thelong haul as a percentage of total sales.

Another metric the company is giving is a projection to end the quarterwith some $530 million in cash and equivalents at the end of thequater. Its market cap before any gains today was $753.8 million andits total liabilities listed as of May 31 were $779.8 million.

Shares are up almost 10% at $2.05 right before the open and we havealready seen about 350,000 shares trade hands.  Its 52-week tradingrange is $1.76 to $5.11. We don’t want to sound too skeptical as any raised guidance is better than none at all, but it is very possible that some analysts will point out that some of the gains here are essentially the same as one-time items or at least similar to non-recurring items since it still sees a decrease long-term in the Huawei business.

Jon C. Ogg
August 5, 2008