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3Com to cut inventory levels

Networking company 3Com is cutting the cord on inventory levels, a move that it expects will cut into profits for its upcoming quarterly results.

    Networking company 3Com (COMS) is cutting the cord on inventory levels, a move that it expects will cut into profits for its upcoming quarterly results.

    The company said it has reduced the inventory level at its channel partners. It also has revised its inventory practices across many levels of its business--including its partners, business units, and worldwide divisions--in order to aid predictability and streamline sales.

    3Com expects the new plan to result in a reduction of inventory levels in the channels by three to five weeks. The company said the changes should help it adjust more quickly to shifts in market demand and business conditions.

    The changes will impact financial results for the second quarter of fiscal 1998, which ended November 30. Revenue is expected to be $1.22 billion to $1.24 billion. For the same quarter a year ago, the company reported revenue of $820 million, and in the first quarter of fiscal 1998, the company reported revenue of $1.6 billion. 3Com said revenue in that range is expected to produce a "slight profit for the quarter."

    Analysts had expected the company to report profits of 44 cents a share, according to First Call's consensus of analysts' estimates. Last year, the company's profits were 57 cents a share. Additionally, during the first fiscal quarter of last year, the company reported a loss of 43 cents a share, based on the combined operations of both 3Com and U.S. Robotics, or pro-forma performance.

    Excluding a $426 million charge relating to its merger, 3Com would have posted earnings of $172.2 million, or 48 cents a share.

    Complete 3Com financial results will be reported on or near December 18.

    Reuters contributed to this report.