3Com Corp. (COMS) is in the news for winning new business deals across geographies. The first one of them is the “Brazil's Airport Administration” deal, where 3Com and its H3C enterprise networking solutions will provide the network infrastructure for the network upgrade project of 11 main airports in Brazil. Under this project, 3Com will be upgrading the wired and wireless network of the Airport, in order to support the increasing traffic of passengers and employees.
This upgrade of Brazil Airports is expected to improve the performance on data, voice and video applications used for flight information systems, air traffic control, surveillance and IP telephony systems substantially, while reducing the total networking cost considerably.
3Com had another win at the South African government’s Social Security Agency (SASSA), wherein SASSA has opted for a distributed network of H3C and 3Com-branded solutions to run its vast social security grant system across the country. The deal, which is valued at $12 million, will help in the implementation of a national network for 600 branch offices around the country over the next three years.
These deals are particularly encouraging, since the company has secured them after much competition. The revenue potential is also good and should have a positive impact on results, going forward.
3Com has a strong balance sheet and has reduced its long-term debt. The company expects to expand business, particularly outside China and refocus on the U.S. market. With decent operating results and strength in the Tipping Point business, 3Com has outperformed management expectations and achieved profitability on a GAAP basis for the fifth consecutive quarter.
Although we are pleased with the company’s performance in recent quarters, increasing competition from large and midsize players like Cisco (NASDAQ:CSCO), Netgear and D-Link may pose some challenges. Moreover, the future of its business in China concerns us, as reseller revenues from Huawei continue to decline.