Network-equipment maker 3Com posted a smaller-than-expected loss in its first quarter Tuesday, losing $41.3 million, or 12 cents a share, on sales of $933.8 million.
First Call Corp. consensus expected 3Com to lose 33 cents a share in the quarter.
3Com (Nasdaq: COMS) shares closed off 6 cents to $13.94 ahead of the earnings report.
In the year-ago quarter, 3Com earned $113.7 million, or 32 cents a share, on sales of $1.2 billion.
The $933.8 million in sales included $127.5 million from the exited analog modem and LAN/WAN high-end chassis businesses.
Excluding those sales, 3Com recorded sales of $806.3 in the quarter, up 20 percent from the fourth quarter.
"In balance, the scale is tipping more to the favorable side than a quarter or two ago, and I'm pleased with the progress thus far," Benhamou said.
Benhamou cited three reasons for 3Com's better-than-anticipated performance:
3Com's expectations remain largely unchanged from earlier statements.
The company sees second quarter revenue from ongoing business growing 8 percent to 13 percent sequentially, which would translate into $870 million to $910 million in sales, CFO Michael E. Rescoe told analysts. Gross margins will improve from the first quarter because of higher production volumes and 3Com's exit from the analog modem business, Rescoe said.
Executives reiterated their goal of reaching operating profits in the fiscal fourth quarter. 3Com currently sees a pro forma operating loss ranging between $60 million and $80 million for the third quarter.
3Com did boost its guidance for full fiscal year revenues. The company now expects to report full year sales between $3.5 billion to $3.7 billion, a $200 million increase from previous guidance.
Considering 3Com is in the midst of changing its business to exit certain product lines and focus on high-growth markets and technologies, the strong first-quarter results should please its investors.
"The close of our first quarter marks the completion of our restructuring," said CEO Eric Benhamou in a prepared release. "The transformation milestones and business objectives set forth in March 2000 and reaffirmed last quarter were completed on or ahead of schedule."
In the quarter, 3Com's commercial consumer networks business posted sales of $631.9 million in the quarter, up 24 percent from the fourth quarter.
Its carrier networking business reported sales of $167.2 million, up 7 percent from the prior quarter.
In the quarter, its pro forma operating loss was $99 million. Net loss from continuing operations was $63.7 million, or 18 cents a share, well below the company's previous estimate of between $130 million to $160 million.
Total operating expenses for the just-concluded quarter were $439.7 million, down from $453.7 million in the fourth quarter.
Last quarter, 3Com posted a loss of $146.8 million, or 42 cents a share, on sales of $763.7 million.
Its shares rallied up to a 52-week high of $119.75 in March before falling to a low of $12.50 in July.
Ten of the 20 analysts following the stock rate it either a "buy" or "strong buy" while the other 10 call it a "hold."
-- Sergio G. Non contributed to this report.