3Com lays off 1,200

Cuts are part of wider problems hitting the telecoms market, says chief executive

3Com will eliminate 1,200 jobs as part of a cost-cutting move, the company said yesterday.

Chief executive Bruce Claflin said the cuts, which amount to around ten percent of its work force according to a company spokesman, are a reaction to broader woes hitting the telecom market.

"In light of the US economic downturn and turmoil in the telecommunications industry, I announced in December a global cost reduction initiative," Claflin said in a release. "3Com will focus all of its resources on work critical to market leadership and superior financial returns."

3Com makes networking equipment for telecommunications carriers, Internet service providers and consumers. It's hardly the first time the words slowdown and networking have been paired up. The entire sector has struggled with demand issues. Nortel Networks earlier this month cut earnings and revenue estimates and slashed its work force by ten thousand. That news took much of the networking sector down too. Before Nortel, Cisco Systems predicted lower sales growth.

And other firms that supply the telecom sector, including Motorola and Texas Instruments, have warned they would miss results as well.

3Com had bested analysts' expectations and lowered expectations in its second quarter in December, posting a loss of $52.4m (£36.2m), or 15 cents per share, on sales of $789.5m (£545.9m).

3Com said that it would continue to focus on cost reductions in employment, discretionary costs, product costs, and plant, property, and equipment costs, although it did not outline specific measures.

The firm blamed the second-quarter loss on slowing sales of network equipment to telecom carriers and Internet service providers.

"Given all the restructurings going on there it's not surprising. And also given the difficult industry environment," said Paul Sagawa, analyst at Sanford Bernstein. "They're not immune to all the problems, they're just smaller -- they can't lay off 10,000."

3Com had announced plans to spin off its high-end carrier equipment business in December, and recently completed the spinoffs of its Palm and US Robotics businesses.

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