______________________________________________________________________
united states
securities and exchange commission
Washington, D. C. 20549
FORM 10-Q
quarterly report pursuant to section 13 or 15(d) of
the securities exchange act of 1934
For the Quarterly Period Ended August 31, 1996 Commission File No. 0-12867
or
transition report pursuant to section 13 or 15(d) of
the securities exchange act of 1934
For the transition period from to
____________
3Com Corporation
(Exact name of registrant as specified in its charter)
California 94-2605794
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Bayfront Plaza 95052
Santa Clara, California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (408) 764-5000
Former name, former address and former fiscal year, if changed since last
report: N/A
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ....XX.... No ................
As of August 31, 1996, 169,904,038 shares of the Registrant's Common Stock
were outstanding.
_______________________________________________________________________
3Com Corporation
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
August 31, 1996 and May 31, 1996
Consolidated Statements of Income
Quarters Ended August 31, 1996 and 1995
Consolidated Statements of Cash Flows
Quarters Ended August 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3Com Corporation
Consolidated Balance Sheets
(Dollars in thousands)
August 31, May 31,
1996 1996
---------- -------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 218,035 $ 216,759
Temporary cash investments 359,111 282,578
Trade receivables 418,840 359,182
Inventories 227,375 241,018
Deferred income taxes 87,789 79,259
Other 70,933 60,915
---------- ----------
Total current assets 1,382,083 1,239,711
---------- ----------
Property and equipment-net 267,531 246,652
Other assets 39,916 38,754
---------- ----------
Total $1,689,530 $1,525,117
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 111,418 $ 120,211
Accrued and other liabilities 241,005 211,620
Income taxes payable 106,267 82,690
---------- ----------
Total current liabilities 458,690 414,521
Long-term debt 110,000 110,000
Other long-term obligations 5,371 5,492
Deferred income taxes 22,638 16,299
Shareholders' Equity:
Preferred stock, no par value, 3,000,000 shares
authorized; none outstanding - -
Common stock, $.01 par value, 400,000,000 shares
authorized; shares outstanding: August 31, 1996:
169,904,038; May 31, 1996: 168,799,586 619,771 597,452
Unamortized restricted stock grants (4,144) (4,487)
Retained earnings 472,468 379,358
Unrealized net gain on available-for-sale
securities 5,257 7,159
Accumulated translation adjustments (521) (677)
---------- ----------
Total shareholders' equity 1,092,831 978,805
---------- ----------
Total $1,689,530 $1,525,117
========== ==========
See notes to consolidated financial statements.
3Com Corporation
Consolidated Statements of Income
(In thousands except per share data)
(Unaudited)
Quarters Ended
August 31,
------------------
1996 1995
---- ----
Sales $ 706,968 $ 497,289
Cost of sales 325,032 235,550
---------- ----------
Gross margin 381,936 261,739
Operating expenses:
Sales and marketing 141,357 102,211
Research and development 69,516 51,548
General and administrative 29,591 20,941
---------- ----------
Total 240,464 174,700
---------- ----------
Operating income 141,472 87,039
Other income--net 2,894 1,253
---------- ----------
Income before income taxes 144,366 88,292
Income tax provision 51,253 30,871
---------- ----------
Net income $ 93,113 $ 57,421
========== ==========
Net income per common and
equivalent share:
Primary $ 0.52 $ 0.33
Fully diluted $ 0.52 $ 0.33
Common and equivalent shares used
in computing per share amounts:
Primary 179,174 173,833
Fully diluted 179,448 174,520
See notes to consolidated financial statements.
3Com Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Quarters Ended
August 31,
------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 93,113 $ 57,421
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 31,987 19,446
Deferred income taxes (875) 11,966
Adjustment to conform fiscal year of pooled
entity - Chipcom - (3,048)
Changes in assets and liabilities, net of effects
of acquisitions:
Trade receivables (59,658) (40,995)
Inventories 11,804 (17,116)
Other current assets (13,365) 2,794
Accounts payable (8,793) (1,866)
Accrued and other liabilities 30,756 (5,995)
Income taxes payable 38,083 14,950
Acquisition-related reserves (1,036) -
---------- ----------
Net cash provided by operating activities 122,016 37,557
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (48,314) (38,228)
Purchase of temporary cash investments (152,770) (47,103)
Proceeds from temporary cash investments 75,401 86,720
Other-net (2,805) (7,989)
---------- ----------
Net cash used for investing activities (128,488) (6,600)
---------- ----------
Cash flows from financing activities:
Sale of stock 7,810 5,444
Repayments of notes payable and capital
lease obligations (218) (1,717)
Other-net 156 (366)
---------- ----------
Net cash provided by financing activities 7,748 3,361
---------- ----------
Increase in cash and cash equivalents 1,276 34,318
Cash and cash equivalents at beginning of period 216,759 159,908
---------- ----------
Cash and cash equivalents at end of period $ 218,035 $ 194,226
========== ==========
Non-cash financing and investing activities:
Tax benefit on stock option transactions $ 14,506 $ 8,698
Unrealized net gain (loss) on available-
for-sale securities $ (1,902) $ 122
See notes to consolidated financial statements.
3Com Corporation
Notes to Consolidated Financial Statements
1. The consolidated financial statements include the
accounts of 3Com Corporation (the "Company") and its
wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. In the
opinion of management, these unaudited consolidated
financial statements include all adjustments necessary
for a fair presentation of the Company's financial
position as of August 31, 1996, and the results of
operations and cash flows for the quarters ended August
31, 1996 and 1995.
The results of operations for the quarter ended
August 31, 1996 may not necessarily be indicative of the
results to be expected for the fiscal year ending May 31,
1997.
These financial statements should be read in
conjunction with the consolidated financial statements
and related notes thereto included in the Company's
Annual Report to Shareholders for the fiscal year ended
May 31, 1996.
2. Inventories consisted of (in thousands):
August 31, May 31,
1996 1996
---- ----
Finished goods $ 130,224 $ 132,363
Work-in-process 18,604 22,310
Raw materials 78,547 86,345
---------- ----------
Total $ 227,375 $ 241,018
========== ==========
3. Net Income Per Share
Net income per common and equivalent share is
computed based on the weighted average number of common
shares and the dilutive effects of stock options
outstanding during the period using the treasury stock
method. The effect of the assumed conversion of the
10.25% convertible subordinated notes was excluded from
the computation as it was antidilutive for the periods
presented.
4. Litigation
On October 13, 1995, the Company acquired Chipcom,
which had already been named as a defendant in the
litigation described below. Five complaints were filed
between May, 30, 1995 and June 16, 1995 that alleged
violations by the defendants of Sections 10(b) and 20(a)
of the Securities and Exchange Act of 1934, and sought
unspecified damages. The cases were consolidated for
pretrial purposes pursuant to an order entered by the
Court on June 15, 1995. The consolidated action is
entitled In re: Chipcom Securities Litigation, Civil
Action No. 95-111114-DPW. A Consolidated Complaint was
filed on September 13, 1995, and an Amended Consolidated
Complaint was filed on November 30, 1995.
The defendants' motion to dismiss the Amended
Consolidated Complaint was granted without leave to amend
on May 1, 1996. The dismissal covers all five cases. The
plaintiffs appealed the order granting the dismissal. On
October 1, 1996, the parties to these cases agreed upon
what the Company considers to be favorable financial
terms for settlement of all five cases, which amount the
Company does not consider material to its operations or
financial position. Pursuant to the contemplated
settlement, which would be subject to the approval of the
District Court, it is intended that all claims of all
persons which are related to the subject matter of the
Consolidated Complaint would be settled and released.
5. Subsequent Event
On September 26, 1996, the shareholders of the
Company approved a proposal to amend 3Com's Articles of
Incorporation to designate a par value of $.01 for each
share of common stock. The financial statements have
been restated to reflect this event.
3Com Corporation
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Quarters Ended August 31, 1996 and 1995
The Company achieved record sales in the first quarter of
fiscal 1997 totaling $707.0 million, an increase of $209.7
million or 42 percent from the corresponding quarter a year
ago. Compared with the fourth quarter of fiscal 1996, sales
for the first quarter of fiscal 1997 increased $46.7 million
or seven percent.
The Company believes that the year-over-year increase in
first quarter sales is due to several factors, including
continued strength in the data networking market as customers
migrate to new technologies such as Fast Ethernet, increases
in worldwide personal computer sales, and the strength of the
Company's product offerings at the edge of the network,
including workgroup switching and hubs. The Company also
believes that the impact of a strong new product cycle in
systems and adapter products and the continuous expansion of
3Com's product offerings and its ability to deliver complete
data networking solutions for different connectivity
environments contributed to the increase in first quarter
sales over the same period a year ago.
Sales of network systems products (i.e., internetworking
platforms, remote access servers, hubs, switching products and
customer service) in the first quarter of fiscal 1997
represented 59 percent of total sales and increased 38 percent
from the same quarter one year ago. In the first quarter of
fiscal 1996, sales of network systems products represented 61
percent of total sales. The increase was led primarily by the
LinkSwitch(registered trademark) workgroup switching family, the
LinkBuilder(registered trademark) FMSII stackable hub, the
SuperStack LinkBuilder FMS 100 Stackable Fast Ethernet Hub,
and the CELLplex(trademark) ATM switching family.
The increase was partially offset by a decrease in sales of
discontinued product lines acquired from Chipcom. Customer
service revenue is included in network systems products
(previously this revenue was classified as other products),
and accordingly, all sales composition and growth percentages
reflect this reclassification.
Sales of network adapters in the first quarter of fiscal
1997 represented 40 percent of total sales and increased 52
percent from the year-ago period. In the first quarter of
fiscal 1996, sales of network adapters represented 37 percent
of total sales. The increase in network adapter sales was led
primarily by the Fast EtherLink(registered trademark) PCI
adapters, EtherLink III family of network adapters, and the
EtherLink PC Card adapters.
Sales of other products represented one percent of total
sales in the first quarter of fiscal 1997, compared with two
percent of total sales in the first quarter of fiscal 1996,
and is not significant to the Company's operations, as
expected.
Sales in the United States for the first quarter of
fiscal 1997, comprised 52 percent of total sales, compared to
49 percent in the same period a year ago. Sales growth in the
United States was 49 percent when compared to the first
quarter of fiscal 1996. The Company believes the growth in
sales in the United States can be attributed primarily to
increased sales to large enterprise organizations and the
enhancement of the Company's product portfolio. International
sales for the first quarter of fiscal 1997 increased 35
percent over the same period a year ago, and increased in all
geographic regions, primarily in the Asia Pacific region. The
Company believes that the growth in International sales is due
primarily to the Company's continued global expansion through
the opening of new sales offices, and the expansion of its
worldwide field sales, service and support programs. The
Company's operations were not significantly impacted by
fluctuations in foreign currency exchange rates in the first
quarters of fiscal 1997 and 1996.
Cost of sales as a percentage of sales was 46.0 percent
in the first quarter of fiscal 1997, compared to 47.4 percent
for the first quarter of fiscal 1996. The resulting
improvement in gross margin in the first quarter of fiscal
1997 primarily reflected an increased shipment mix of higher
margin workgroup switching and stackable system products, and
lower product material costs of certain adapter products. The
combination of these factors would have increased gross margin
by approximately 2.7 percentage points. Factors causing the
increase in gross margin were partially offset by increased
provisions for excess and obsolete inventories and a higher
mix of certain lower margin adapter products, which
collectively would have reduced gross margin by approximately
1.3 percentage points.
Total operating expenses in the first quarter of fiscal
1997 were $240.5 million, or 34.0 percent of sales, compared
to $174.7 million, or 35.1 percent of sales, in the first
quarter of fiscal 1996.
Sales and marketing expenses in the first quarter of
fiscal 1997 increased $39.1 million or 38 percent from fiscal
1996. As a percentage of sales, sales and marketing expenses
decreased to 20.0 percent in the first quarter of fiscal 1997,
from 20.6 percent in the corresponding fiscal 1996 period.
The decrease as a percentage of sales is due in part to gains
in efficiency following assimilation of the separate sales,
marketing and support organizations initially present as a
result of the fiscal 1996 acquisition of Chipcom. A recent
initiative of the Company is to increase personnel in field
sales, service and support organizations to further serve its
customers and channel partners, which the Company anticipates
may result in a slight increase in sales and marketing expense
as a percentage of sales in future periods.
Research and development expenses in the first quarter of
fiscal 1997 increased $18.0 million or 35 percent from the
year-ago period. As a percentage of sales, such expenses
decreased to 9.8 percent in fiscal 1997, compared to 10.4
percent in the first quarter of fiscal 1996. The increase in
research and development expenses was primarily attributable
to the cost of developing 3Com's new products, primarily
switching, traffic management and adapter products, and the
Company's expansion into new technologies and markets. The
Company believes the timely introduction of new technologies
and products is crucial to its success, and plans to continue
to make acquisitions to accelerate time to market where
appropriate. Most of the in-process research and development
projects acquired in connection with the Company's business
acquisitions have been completed. The Company estimates that
the remaining costs in connection with the completion of
outstanding acquired research and development projects are not
significant, and are primarily made up of labor costs for
design, prototype development and testing. The Company
anticipates total future research and development spending as
a percent of sales will not significantly differ from its
historical trend.
General and administrative expenses in the first quarter
of fiscal 1997 increased $8.7 million or 41 percent from the
same period a year-ago. The increase in general and
administrative expenses reflected expansion of the Company's
infrastructure through internal growth, and higher provisions
for bad debts, as a result of the increased volume of sales.
As a percentage of sales, such expenses remained flat at 4.2
percent, when compared to the same period a year ago.
Other income (net) was $2.9 million in the first quarter
of fiscal 1997, compared to $1.3 million in the first quarter
of fiscal 1996. The increase was due primarily to interest
income, which increased due to larger cash and investment balances.
The Company's effective income tax rate was 35.5 percent
in the first quarter of fiscal 1997, compared to 35.0 percent
in the first quarter of 1996.
Net income for the first quarter of fiscal 1997 was $93.1
million, or $0.52 per share, compared to net income of $57.4
million, or $0.33 per share, for the first quarter of fiscal
1996. Net income and net income per share increased 62 and 58
percent, respectively, from the first quarter of fiscal 1996.
Business Environment and Risk Factors
The Company's future operating results may be affected by
various trends and factors which the Company must successfully
manage in order to achieve favorable operating results. In
addition, there are trends and factors beyond the Company's
control which affect its operations. In accordance with the
provisions of the Private Securities Litigation Reform Act of
1995, the cautionary statements set forth below identify
important factors that could cause actual results to differ
materially from those in any forward-looking statements which
may be contained in this report. Such trends and factors
include, but are not limited to, adverse changes in general
economic conditions or conditions in the specific markets for
the Company's products, governmental regulation or
intervention affecting communications or data networking,
fluctuations in foreign exchange rates, and other factors,
including those listed below. The Company participates in a
highly volatile and rapidly growing industry which is
characterized by vigorous competition for market share and
rapid technological development carried out amidst uncertainty
over adoption of industry standards and protection of
proprietary intellectual property rights. This could result
in aggressive pricing practices and growing competition, both
from start-up companies and from well-capitalized computer
systems and communications companies. The Company's ability
to compete in this environment depends upon a number of
competitive and market factors, and is subject to the risks
set forth in this report.
The market for the Company's products is characterized by
rapidly changing technology. The Company's success depends,
in substantial part, on the timely and successful introduction
of new products. An unexpected change in one or more of the
technologies affecting data networking, or in market demand
for products based on a particular technology could have a
material adverse effect on the Company's operating results if
the Company does not respond timely and effectively to such
changes. The Company is engaged in research and development
activities in certain emerging LAN and WAN high-speed
technologies, such as ATM, ISDN, Fast Ethernet, Gigabit
Ethernet and data-over-cable. As the industry standardizes on
high-speed technologies, there can be no assurance that the
Company will be able to respond promptly and cost-effectively
to compete in the marketplace.
Some key components of the Company's products are
currently available only from single sources. There can be no
assurance that in the future the Company's suppliers will be
able to meet the Company's demand for components in a timely
and cost-effective manner. The Company's operating results
and customer relationships could be adversely affected by
either an increase in prices for, or an interruption or
reduction in supply of, any key components.
The Company distributes a significant portion of its
products through third party distributors and resellers. Due
to consolidation in the distribution and reseller channels and
the Company's increased volume of sales into these channels,
the Company has experienced an increased concentration of
credit risk. While the Company continually monitors and
manages this risk, financial difficulties on the part of one
or more of the Company's resellers may have a material adverse
effect on the Company. Likewise, the Company's expansion into
certain emerging geographic markets, characterized by economic
and political instability and currency fluctuations, may
subject the Company's resellers to financial difficulties
which may have an adverse impact on the Company.
The Company will continue to invest during fiscal 1997 in
expanding its sales, marketing, service, logistics and
manufacturing operations worldwide. The Company's ability to
achieve continued sales and earnings growth may be adversely
affected unless the Company can successfully implement several
projects, including the continued expansion of the Company's
direct sales force and the establishment of a new
manufacturing and distribution facility in the Asia Pacific
region.
Acquisitions of complementary businesses and
technologies, including technologies and products under
development, are an active part of the Company's overall
business strategy. Certain of the Company's major competitors
have also been engaged in merger and acquisition transactions.
Such consolidations by competitors are likely to create
entities with increased market share, customer base,
technology and marketing expertise, sales force size, or
proprietary technology in segments in which the Company
competes, which may adversely affect the Company's ability to
compete in such segments.
The Company has consummated several acquisitions in
recent years. There can be no assurance that products,
technologies, distribution channels, key personnel and
businesses of acquired companies will be effectively
assimilated into the Company's business or product offerings,
or that such integration will not adversely affect the
Company's business, financial condition or results of
operations. The difficulties of such integration may be
increased by the size and number of such acquisitions and the
requirements of coordinating geographically separated
organizations. There can be no assurance that any acquired
products, technologies or businesses will contribute at
anticipated levels to the Company's sales or earnings, that
the sales, earnings and technologies under development from
acquired businesses will not be adversely affected by the
integration process or other general factors. If the Company
is not successful in the integration of such acquisitions,
there could be an adverse impact on the financial results of
the Company. The high-growth nature of the computer
networking industry, coupled with critical time-to-market
factors, has caused increased competition and consolidation.
As a result, there has been a significant increase in the
acquisition value of computer networking companies. Future
acquisitions are therefore more likely to result in values
that are material to the Company's operations. There can be
no assurance that the Company will continue to be able to
identify and consummate suitable acquisition transactions in
the future.
The Company's business is characterized by the continuous
introduction of new products and the management of the
transition of those products from prior generations of
technology or product platforms. In each product transition
cycle, the Company faces the challenge of managing the
inventory of its older products, including materials, work-in-
process, and products held by resellers. If the Company is
not successful in managing these transitions, there could be
an adverse impact on the financial results of the Company.
The Company's products are covered by product warranties
and the Company may be subject to contractual commitments
concerning product features or performance. If unexpected
circumstances arise such that the product does not perform as
intended and the Company is not successful in resolving
product quality or performance issues, there could be an
adverse impact on sales and earnings.
The market price of the Company's common stock has been,
and may continue to be, extremely volatile. Factors such as
new product announcements by the Company or its competitors,
quarterly fluctuations in the Company's operating results,
challenges associated with integration of businesses and
general conditions in the data networking market may have a
significant impact on the market price of the Company's
common stock. These conditions, as well as factors which
generally affect the market for stocks of high technology
companies, could cause the price of the Company's stock to
fluctuate substantially over short periods.
Notwithstanding the Company's increased geographical
diversification, the Company's corporate headquarters and a
large portion of its research and development activities and
other critical business operations are located in California,
near major earthquake faults. The Company's business,
financial condition and operating results could be materially
adversely affected in the event of a major earthquake.
Because of the foregoing factors, as well as other
factors affecting the Company's operating results, past trends
and performance should not be presumed by investors to be an
accurate indicator of future results or trends.
Liquidity and Capital Resources
Cash, cash equivalents and temporary cash investments at
August 31, 1996 were $577.1 million, increasing $77.8 million,
from May 31, 1996.
For the three months ended August 31, 1996, net cash
generated from operating activities was $122.0 million. Trade
receivables at August 31, 1996 increased $59.7 million from
May 31, 1996 due primarily to an increase in sales. Days
sales outstanding in receivables was 53 days at August 31,
1996, compared to 49 days at May 31, 1996. The increase in
days sales outstanding is consistent with the trend in
previous first fiscal quarters. Inventory levels at August
31, 1996 decreased $13.6 million from the prior fiscal year-
end, with inventory turnover increasing to 5.6 turns at August
31, 1996, compared to 5.4 turns at May 31, 1996.
During the three months ended August 31, 1996, the
Company made $48.3 million in capital expenditures. Major
capital expenditures included upgrades and additions to
product manufacturing lines in Santa Clara and Ireland,
continuing development of the Company's worldwide information
systems, and purchases and upgrades of desktop systems.
During the first quarter of fiscal 1997, the Company
received cash of $7.8 million from the sale of its common
stock to employees through its option plans.
The Company leases and occupies 225,000 square feet of
office and manufacturing space adjacent to its existing
headquarters in Santa Clara (Phase I). The Company amended
this lease agreement on February 1, 1996 to add 150,000 square
feet of office and manufacturing space and a parking garage
(Phase II) to be build on adjacent land. The amended lease
expires in five years and provides the Company with an option
to purchase both Phase I and II properties, or arrange for the
sale of the properties, to a third party with a guaranteed
residual value of up to $57.8 million to the seller of the
properties. The Company anticipates that it will commence
occupancy of and begin lease payments on the significant
portion of the Phase II property in the fourth quarter of
fiscal 1997.
The Company has a $40 million revolving bank credit
agreement which expires December 31, 1996. No amount is
outstanding under the credit agreement and the Company is in
compliance with all financial ratio and minimum net worth
requirements.
Based on current plans and business conditions, the
Company believes that its existing cash and equivalents,
temporary cash investments, cash generated from operations and
the available revolving credit agreement will be sufficient to
satisfy anticipated operating cash requirements for at least
the next twelve months.
Subsequent Event
On October 7, 1996 the Company announced a definitive
agreement to acquire OnStream Networks, Inc. (OnStream)
located in Santa Clara, California. OnStream develops,
manufactures and supports high-speed, broadband network access
and management products for enterprises and telecommunications
carriers. The transaction will be accounted for as a pooling-
of-interests. The Company expects to issue approximately 3.3
million shares of its common stock and options to purchase
500,000 shares of its common stock in exchange for all
outstanding stock and options of OnStream. The merger is
subject to a number of conditions including the effectiveness
of a registration statement covering the shares to be issued
and approval by the shareholders of OnStream, and is expected
to be completed in November 1996. As a result of the merger,
it is expected that the combined company will incur a charge
of approximately $5 to $10 million, primarily for direct
transaction costs. These non-recurring costs will be charged
to the Company's operations in the fiscal quarter in which the
merger is consummated.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 13, 1995, the Company acquired Chipcom,
which had already been named as a defendant in the
litigation described below. Five complaints were filed
between May 30, 1995 and June 16, 1995 that alleged
violations by the defendants of Sections 10(b) and 20(a)
of the Securities and Exchange Act of 1934, and sought
unspecified damages. The cases were consolidated for
pretrial purposes pursuant to an order entered by the
Court on June 15, 1995. The consolidated action is
entitled In re: Chipcom Securities Litigation, Civil
Action No. 95-111114-DPW. A Consolidated Complaint was
filed on September 13, 1995, and an Amended Consolidated
Complaint was filed on November 30, 1995.
The defendants' motion to dismiss the Amended
Consolidated Complaint was granted without leave to amend
on May 1, 1996. The dismissal covers all five cases. The
plaintiffs appealed the order granting the dismissal. On
October 1, 1996, the parties to these cases agreed upon
what the Company considers to be favorable financial
terms for settlement of all five cases, which amount the
Company does not consider material to its operations or
financial position. Pursuant to the contemplated
settlement, which would be subject to the approval of the
District Court, it is intended that all claims of all
persons which are related to the subject matter of the
Consolidated Complaint would be settled and released.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No exhibits were required to be filed for the
quarter ending August 31, 1996.
(b) Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
3Com Corporation
(Registrant)
Dated: October 11, 1996 By: /s/ Christopher B. Paisley
------------------ --------------------------
Christopher B. Paisley
Senior Vice President Finance
and Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 218,035
<SECURITIES> 359,111
<RECEIVABLES> 418,840
<ALLOWANCES> (29,705)
<INVENTORY> 227,375
<CURRENT-ASSETS> 1,382,083
<PP&E> 516,980
<DEPRECIATION> (249,449)
<TOTAL-ASSETS> 1,689,530
<CURRENT-LIABILITIES> 458,690
<BONDS> 0
<COMMON> 619,771
0
0
<OTHER-SE> 473,060
<TOTAL-LIABILITY-AND-EQUITY> 1,689,530
<SALES> 706,968
<TOTAL-REVENUES> 706,968
<CGS> 325,032
<TOTAL-COSTS> 466,389
<OTHER-EXPENSES> 89,509
<LOSS-PROVISION> 3,762
<INTEREST-EXPENSE> 2,943
<INCOME-PRETAX> 144,366
<INCOME-TAX> 51,253
<INCOME-CONTINUING> 93,113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,113
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
