Total revenues for the quarter were $789.5 million, including $22.8 million for sales of exited businesses. Second quarter revenues from ongoing businesses were $766.7 million, representing a five percent decline from ongoing revenues of $806.3 million in the prior quarter. Pro forma net loss, which excludes non-recurring items and amortization of goodwill and acquired intangibles, was $52.4 million or $0.15 per share, compared to a pro forma net loss of $41.3 million or $0.12 per share in the prior quarter.

The company attributes the sequential decline of ongoing revenues primarily to the recent market slowdown in the telecom sector. During the quarter, several Tier 1 service providers announced reorganizations which 3Com believes created disruptions in their purchasing cycles. Also, financing constraints and consolidation activities among several Tier 2 and Tier 3 service providers resulted in deferrals of equipment purchases. Accordingly, sales for 3Com’s Carrier Networking Business in the second fiscal quarter declined 43% to $95.4 million compared to sales of $167.2 million in the first quarter of fiscal 2001.

The significant slowdown in the telecom industry adversely impacted 3Com during the quarter, said Bruce Claflin, 3Com’s president and chief operating officer. However, we remain bullish on the potential of the telecom industry and, in particular, the prospects for our Carrier Networking Business.

Second quarter sales for the Commercial and Consumer Networking Business were $671.3 million, up five percent compared to first quarter fiscal 2001 sales of $639.1 million. Although sales for the Commercial business were in-line with the company’s expectations, the Consumer business experienced softer than expected sales of broadband customer premise equipment (CPE). The company attributes the softness in broadband CPE sales principally to deployment issues at several service providers, which adversely impacted sales of digital subscriber line modems, and to a lesser degree, cable modems.

We are encouraged by the continued recovery of our overall Commercial/Consumer Business, said Claflin. This quarter we launched several exciting products and solutions, entered into a strategic alliance with Broadcom and initiated the acquisition of the Alteon WebSystems Gigabit NIC business, which was completed this month. These accomplishments will strengthen our market leadership position and contribute to our future growth.

Gross margin for the quarter was $291.4 million or 37% of reported net sales which compares to $340.7 million or 36% of net sales for the fiscal first quarter. In absolute dollars, gross margins were lower due to the substantial decline in Carrier Networking sales. As a percentage of sales, gross margins improved due to reduced sales of lower margin products.

Total operating expenses for the quarter were $432.3 million, down $54.0 million or 11 percent compared to total operating expenses of $486.3 million in Q1. On a pro forma basis, operating expenses were $403.2 million, down $36.5 million or eight percent compared to pro forma operating expenses of $439.7 million in the prior quarter. The decline in operating expenses from the first fiscal quarter is primarily attributable to cost containment efforts in selling, general and administrative activities.

There were several non-recurring income and expense items during the quarter. The principal items included a gain on the sale of land and facilities of $176.0 million, a $250.0 million net charge related to the settlement of a shareholder lawsuit, an in-process research and development charge of $8.3 million related to the acquisition of Nomadic Technologies, and a $16.9 million net loss on investments.

The second quarter pro forma operating loss was $111.8 million compared to the pro forma operating loss of $99.0 million recorded in the first quarter of fiscal 2001.

Basic and fully diluted shares outstanding for the second quarter were 345.7 million, down from 353.8 million in the prior quarter due to share repurchases of approximately 10.4 million shares, partially offset by employee stock option exercises.

The company’s balance sheet remains strong with cash and short-term investments of $2.4 billion as of December 1, 2000.