3Com posts loss and closes Net appliance unit

3Com Corp. announced it would close its consumer Internet appliance unit following the posting of a pro forma net loss of US$122.8 million for the company’s third quarter.

The company is in the midst of a restructuring to try to generate ongoing cost savings of US$1 billion by the end of the fiscal year. In an effort to save $250 million, the company will discontinue its consumer Internet Appliance product lines, including the recently introduced Audrey device, and reduce the cost structure of its broadband modem business.

The company attributed the decline in revenue to reduced demand across most of its product segments, stemming mostly from weaker industry conditions in the United States. The company was affected by a shift in demand to lower-margin commercial access products, eroding prices and margins for consumer broadband modem business, higher unit costs attributable to fixed manufacturing charges and higher provisions for excess or obsolete inventory due to reduced demand.

3Com reported sales declines in its commercial and consumer networking business, commercial sales and consumer sales units. The company ended the quarter with $1.846 billion in cash and short-term investments.

Already, 3Com has cut 1,200 workers or about 10 per cent and implemented costing cutting actions. The layoffs and cost cutting is expected to save 3Com $250 million.