738076--7/31/2007--3COM

related topics

{customer, product, revenue}

{operation, international, foreign}

{acquisition, growth, future}

{competitive, industry, competition}

{property, intellectual, protect}

{cost, operation, labor}

{debt, indebtedness, cash}

{product, market, service}

{system, service, information}

{condition, economic, financial}

{stock, price, operating}

{capital, credit, financial}

{personnel, key, retain}

{tax, income, asset}

{control, financial, internal}

{stock, price, share}

Efforts to reduce operating expenses have involved, and could involve further, workforce reductions, closure of offices and sales or discontinuation of businesses, leading to reduced sales and other disruptions in our business; if these efforts are not successful, we may experience higher expenses than we desire. Our substantial debt could adversely affect our financial condition; and the related debt service obligations may adversely affect our cash flow and ability to invest in and grow our businesses. The restrictions imposed by the terms of our senior secured loan facility could adversely impact our ability to invest in and grow our H3C business. An adverse change in the interest rates for our borrowings could adversely affect our financial condition. Rating downgrades may make it more expensive for us to refinance our debt or borrow money. Risks Related to H3C Segment and Dependence Thereon We are significantly dependent on our H3C segment; if H3C is not successful we will likely experience a material adverse impact to our business, business prospects and operating results. Sales from our H3C segment, and therefore in China, constitute a material portion of our total sales, and our business, financial condition and results of operations will to a significant degree be subject to economic, political and social events in the PRC. Our H3C segment is dependent on Huawei Technologies in several material respects, including as an important customer; should Huawei reduce its business with H3C, our business will likely be materially adversely affected. We must execute on a global strategy to leverage the benefits of our H3C acquisition, including integration activities we determine to undertake; if we are not successful in these efforts, our business will suffer. Our success is dependent on continuing to hire and retain qualified managers and other personnel, including at our H3C segment and reducing senior management turnover in our SCN segment; if we are not successful in attracting and retaining these personnel, our business will suffer. If we do not respond effectively to increased competition caused by industry volatility and consolidation our business could be harmed. Our competition with Huawei in the enterprise networking market could have a material adverse effect on our sales and our results of operations; and after a contractual non-compete period expires, Huawei can increase its level of competition, which would likely materially and adversely affect our business. Risks Related to Business and Technology Strategy We may not be successful at identifying and responding to new and emerging market and product opportunities, or at responding quickly enough to technologies or markets that are in decline. We expect to utilize strategic relationships and other alliances as key elements in our strategy. If we are not successful in forming desired ventures and alliances or if such ventures and alliances are not successful, our ability to achieve our growth and profitability goals could be adversely affected. Our strategy of outsourcing functions and operations may fail to reduce cost and may disrupt our operations. Our reliance on industry standards, technological change in the marketplace, and new product initiatives may cause our sales to fluctuate or decline. We focus on enterprise networking, and our results of operations may fluctuate based on factors related entirely to conditions in this market. Risks Related to Operations and Distribution Channels A significant portion of our SCN sales is derived from a small number of distributors. If any of these partners reduces its business with us, our business could be seriously harmed. We depend on distributors who maintain inventories of our products. If the distributors reduce their inventories of our products, our sales could be adversely affected. If we are unable to successfully develop relationships with system integrators, service providers, and enterprise VARs, our sales may be negatively affected. We may pursue acquisitions of other companies that, if not successful, could adversely affect our business, financial position and results of operations. We may be unable to manage our supply chain successfully, which would adversely impact our sales, gross margin and profitability. Our strategies to outsource the majority of our manufacturing requirements to contract manufacturers may not result in meeting our cost, quality or performance standards. The inability of any contract manufacturer to meet our cost, quality or performance standards could adversely affect our sales and overall results from operations. If we fail to adequately evolve our financial and managerial control and reporting systems and processes, including the management of our H3C segment, our ability to manage and grow our business will be negatively affected. Risks Related to our Operations in the People s Republic of China China s governmental and regulatory reforms and changing economic environment may impact our ability to do business in China. Uncertainties with respect to the Chinese legal system may adversely affect us. If PRC tax benefits available to H3C are reduced or repealed, our business could suffer. H3C is subject to restrictions on paying dividends and making other payments to us. We are subject to risks relating to currency rate fluctuations and exchange controls and we do not hedge this risk in China. Risks Related to Intellectual Property If our products contain undetected software or hardware errors, we could incur significant unexpected expenses and could lose sales. We may need to engage in complex and costly litigation in order to protect, maintain or enforce our intellectual property rights; in some jurisdictions, such as China, our rights may not be as strong as the rights we enjoy in the U.S. We may not be able to defend ourselves successfully against claims that we are infringing the intellectual property rights of others. OSN, our new open source strategy, subjects us to additional intellectual property risks, such as less control over development of certain technology that forms a part of this strategy and a higher likelihood of litigation. Risks Related to the Trading Market Fluctuations in our operating results and other factors may contribute to volatility in the market price of our stock.

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738076--7/31/2007--3COM_CORP