738076--8/11/2006--3COM

related topics

{cost, operation, labor}

{operation, international, foreign}

{customer, product, revenue}

{acquisition, growth, future}

{property, intellectual, protect}

{product, market, service}

{control, financial, internal}

{competitive, industry, competition}

{system, service, information}

{tax, income, asset}

{personnel, key, retain}

{investment, property, distribution}

{condition, economic, financial}

{debt, indebtedness, cash}

{stock, price, share}

We focus primarily on enterprise networking, and our results of operations may fluctuate based on factors related entirely to conditions in this market. If we do not respond effectively to increased competition caused by industry volatility and consolidation our business could be harmed. We may not be able to compensate for lower sales or unexpected cash outlays with cost reductions sufficient to generate positive net income or cash flow. 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. We are significantly dependent on our H-3C joint venture in China and if H-3C is not successful, it could materially and adversely impact our business, business prospects and operating results. Sales from our H-3C joint venture and therefore 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 China. Our China joint venture, H-3C, is dependent on Huawei, our co-owner in this venture, in several material respects, including as an important customer; should Huawei reduce its business with or operational assistance to H-3C, our business could be materially affected. If we fail to adequately evolve our financial and managerial control and reporting systems and processes, including the management of our H-3C segment, our ability to manage and grow our business will be negatively affected. We may not be able to complete or finance a transaction with Huawei to purchase additional interest in our joint venture, H-3C, on favorable terms or at all; if we cannot complete a transaction, our strategy to further invest in H-3C may not occur, we will be subject to the risks of the bid process described below and our business may suffer. We, and our joint venture partner, Huawei, each have the right, starting in November 2006, to initiate a bid process to buy the other out of our China joint venture, H-3C; if Huawei wins the bid process, we will no longer be able to consolidate H-3C s results and may, over time, lose the right to source and resell H-3C s products. 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. Our success is dependent on continuing to hire and retain qualified managers and other personnel; if we are not successful in attracting and retaining these personnel, our business will suffer. 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. A significant portion of our sales is derived from a small number of resellers. 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. The members of the board of our China joint venture designated by our co-owner, Huawei, have protective rights over the approval of certain matters; accordingly if Huawei does not agree with us on these matters, these rights could harm 3Com s business by preventing us from taking desired actions. Our competition with Huawei in the enterprise networking market could have a material adverse effect on our sales and our results of operations. 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. 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 tax benefits available to our China joint venture, H-3C, are reduced or repealed, our business could suffer. H-3C is subject to restrictions on paying dividends and making other payments to us. If we fail to maintain an effective system of internal control over financial reporting that includes our China joint venture, H-3C, we may not be able to accurately report our financial results or prevent fraud. We are subject to risks relating to currency rate fluctuations and exchange controls and we do not hedge this risk in China. 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.

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738076--8/11/2006--3COM_CORP