3Com Reports Third Quarter Fiscal Year 2008 Results

3Com Corporation (NASDAQ: COMS) today reported financial results for its fiscal 2008 third quarter, which ended February 29, 2008. Revenue in the quarter was $336.4 million compared to revenue of $323.4 million in the corresponding period in fiscal 2007, a 4 percent increase.

Net loss in the quarter was $7.8 million, or $0.02 per share, compared with a net loss of $4.8 million, or $0.01 per share, in the third quarter of fiscal year 2007. The net loss increase resulted primarily from a $6.1 million non-cash deferred tax liability provision, which is expected to be reversed in coming quarters. On a non-GAAP basis, net income was $34.2 million, or $0.08 per diluted share, compared with net income of $11.0 million, or $0.03 per diluted share for the third quarter of fiscal year 2007.

In the third quarter, 3Com generated $44.1 million in cash from operations.

"On an operational basis we had a very strong quarter," said Edgar Masri, 3Com President and CEO. "In the third quarter, our revenues were at the highest level since we began consolidating H3C revenue; our gross margins reached a record high of 53 percent; we generated a non-GAAP net income margin of 10 percent; and we were cash-flow positive for the second consecutive quarter. We still have more work to do, but I am very pleased with the continued progress we are making in building a growing and profitable business."

For additional financial information, please refer to the Investor Relations section of the 3Com Web site.

Safe Harbor

This news release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our business objectives and our belief about a reversal in a deferred tax liability provision. These statements are neither promises nor guarantees, but involve risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including, without limitation, risks relating to: our ability to grow profitably and receive approval for lower tax rates under PRC law and other risks detailed in the Company's filings with the SEC, including those discussed in the Company's quarterly report filed with the SEC on Form 10-Q for the quarter ended November 30, 2007.

3Com Corporation does not intend, and disclaims any obligation, to update any forward-looking information contained in this release or with respect to the announcements described herein.

The non-GAAP measures used by the Company exclude restructuring, amortization, in-process research and development, stock-based compensation expense and, if applicable in the relevant period, unusual items, such as a potential change in our tax status in the PRC, the inventory-related adjustment portion of the purchase accounting effects of the Company's acquisition of 49% of H3C, the gains on sales of assets, the gain on an insurance settlement and expenses related to our pending acquisition by affiliates of Bain Capital. The required reconciliations and other disclosures for all non-GAAP measures used by the Company are set forth later in this press release, in the Current Report on Form 8-K furnished to the SEC on the date hereof and/or in the investor relations section of our Web site, www.3com.com.

References to the financial information included in this news release reflect rounded numbers and should be considered approximate values.

About 3Com Corporation

3Com Corporation (NASDAQ: COMS) is a leading provider of secure, converged voice and data networking solutions for enterprises of all sizes. 3Com offers a broad line of innovative products backed by world class sales, service and support, which excel at delivering business value for its customers. 3Com also includes H3C Technologies Co., Limited (H3C), a China-based provider of network infrastructure products. H3C brings high-performance, cost-effective product development and a strong footprint in one of the world's most dynamic markets. Through its TippingPoint division, 3Com is a leading provider of network-based intrusion prevention systems that deliver in-depth application protection, infrastructure protection, and performance protection. For further information, please visit www.3com.com, or the press site www.3com.com/pressbox.

Copyright (C) 2008 3Com Corporation. 3Com, the 3Com logo and TippingPoint are registered trademarks and H3C is a trademark of 3Com Corporation or its wholly owned subsidiaries. All other company and product names may be trademarks of their respective holders.
3Com Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
TABLE A

Three Months Ended
-------------------
February March 2,
29,
2008 2007
--------- ---------

Sales $336,390 $323,441
Cost of sales 156,716 170,004
--------- ---------

Gross profit 179,674 153,437

Operating expenses:
Sales and marketing 82,428 77,338
Research and development 50,530 48,419
General and administrative 26,268 22,466
Amortization of intangibles 25,778 10,228
In-process research and development - 1,700
Restructuring charges 736 2,221
--------- ---------
Total operating expenses 185,740 162,372
--------- ---------

Operating loss (6,066) (8,935)

Gain (loss) on investments, net 23 (582)
Interest (expense) income, net (2,879) 11,265
Other income, net 10,568 9,637
--------- ---------

Income from operations before income taxes and
minority interest of consolidated joint venture 1,646 11,385


Income tax provision (9,486) (1,374)
Minority interest of Huawei in the income of
consolidated joint venture (1) - (14,790)
--------- ---------

Net loss $ (7,840) $ (4,779)
========= =========

Basic and diluted loss per share $ (0.02) $ (0.01)
========= =========

Shares used in computing basic and diluted per
share amounts 400,142 394,351


(1)Represents Huawei's 49% interest in the H3C joint venture for the
period of minority interest that ended with 3Com's acquisition of the
remaining 49% interest on March 29, 2007.
3Com Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
TABLE B
February June 1,
29,
2008 2007
---------- ----------

ASSETS

Current assets:
Cash and equivalents $ 466,030 $ 559,217
Notes receivable 106,595 77,368
Accounts receivable, net 142,309 102,952
Inventories, net 93,668 107,988
Other current assets 46,601 50,157
---------- ----------

Total current assets 855,203 897,682

Property & equipment, net 56,766 76,460
Goodwill 767,274 766,444
Intangibles, net 300,307 371,289
Deposits and other assets 26,757 39,217
---------- ----------

Total assets $2,006,307 $2,151,092
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 104,489 $ 110,430
Current portion of long-term debt 48,000 94,000
Accrued liabilities and other 414,511 435,638
---------- ----------

Total current liabilities 567,000 640,068

Deferred taxes and long-term obligations 16,839 23,725
Long-term debt 288,000 336,000
Stockholders' equity 1,134,468 1,151,299
---------- ----------

Total liabilities and stockholders' equity $2,006,307 $2,151,092
========== ==========
3Com Corporation
Reconciliation of Non-GAAP Measures
(in thousands, margin and except per-share data)
(unaudited)
TABLE C

Three Months Ended
-------------------
February March 2,
29,
2008 2007
--------- ---------
GAAP operating loss $ (6,066) $ (8,935)
Restructuring 736 2,221
Amortization of intangible assets 25,778 10,228
In-process research and development (a) - 1,700
Impacts to cost of sales from purchase
accounting adjustments to inventory (b) 57 -
Stock-based compensation expense (c) 5,544 4,896
Acquiree expensed acquisition costs (d) 2,988 -
--------- ---------
Non-GAAP operating income $ 29,037 $ 10,110
========= =========


GAAP net loss $ (7,840) $ (4,779)
Restructuring 736 2,221
Amortization of intangible assets 25,778 10,228
In-process research and development (a) - 1,700
Impacts to cost of sales from purchase
accounting adjustments to inventory (b) 57 -
Stock-based compensation expense (c) 5,544 4,896
Huawei's 49% minority interest in H3C's
amortization as shown above - (3,219)
Acquiree expensed acquisition costs (d) 2,988 -
Gain on sales of assets (e) (1,225) -
Loss on insurance settlement (f) 2,066 -
Charge related to change in tax status (g) 6,056 -
--------- ---------
Non-GAAP net income $ 34,160 $ 11,047
========= =========

GAAP net loss per share $ (0.02) $ (0.01)
Restructuring 0.00 0.01
Amortization of intangible assets 0.06 0.03
In-process research and development (a) - 0.00

Impacts to cost of sales from purchase
accounting adjustments to inventory (b) 0.00 -
Stock-based compensation expense (c) 0.01 0.01
Huawei's 49% minority interest in H3C's
amortization as shown above - (0.01)
Acquiree expensed acquisition costs (d) 0.01 -
Gain on sales of assets (e) (0.00) -
Gain on insurance settlement (f) 0.01 -
Charge related to change in tax status (g) 0.01 -
--------- ---------
Non-GAAP net income per share, diluted $ 0.08 $ 0.03
========= =========
Shares used in computing diluted per share amounts 404,502 400,146


GAAP net loss margin -2.3% -1.5%
Restructuring 0.2% 0.7%
Amortization of intangible assets 7.7% 3.2%
In-process research and development (a) 0.0% 0.5%
Impacts to cost of sales from purchase
accounting adjustments to inventory (b) 0.0% 0.0%
Stock-based compensation expense (c) 1.7% 1.5%
Huawei's 49% minority interest in H3C's
amortization as shown above 0.0% -1.0%
Acquiree expensed acquisition costs (d) 0.9% 0.0%
Gain on sales of assets (e) -0.4% 0.0%
Loss on insurance settlement (f) 0.6% 0.0%
Charge related to change in tax status (g) 1.8% 0.0%
--------- ---------
Non-GAAP net income margin 10.2% 3.4%
========= =========

(a) In-process research and development from our acquisition of Roving
Planet.
(b) Results from our 49% H3C acquisition
transaction.
(c) Stock-based compensation expense is included in the following cost
and expense categories by period:

Three Months Ended
-------------------
February March 2,
29,
2008 2007
--------- ---------
Cost of sales 496 418
Sales and marketing 1,753 1,553
Research and development 1,100 1,060
General and administrative 2,195 1,865


(d) These expenses relate to the announced acquisition of the Company
in September 2007
(e) The gain relates to a patent sale in Q3 fiscal
2008
(f) This loss relates to the recording of final costs associated with
our Hemel facility.
(g) This expense relates $6.1 million non-cash deferred tax liability
provision