March 25, 1997 10:45 AM ET
3Com hit with class-action lawsuit
By Maria Seminerio

  3Com Corp. has been sued by investors claiming company officials issued falsely inflated earnings forecasts for the first half of fiscal 1997 and alleging that executives garnered $59 million by selling off shares after the stock jumped to near-record highs.

The suit, filed today in California Superior Court for Santa Clara County, seeks damages for all purchasers of 3Com common stock during the period from Sept. 24, 1996, to Feb. 10, 1997, according to attorneys for the plaintiffs, Milberg, Weiss, Bershad, Hynes & Lerach, of San Diego.

3Com officials did not respond to phone calls seeking comment.

The company "reported revenue and earnings per share growth forecasts in excess of analysts' estimates" for the first quarter and second quarter of its 1997 fiscal year, "attributing these spectacular results to extraordinarily strong demand for its Fast Ethernet Adapter Cards," according to the plaintiffs' attorneys.

3Com stock jumped from $52 per share in late September to more than $81 per share in mid-December, shortly before "10 3Com insiders" dumped 896,000 shares, the lawsuit claims. The plaintiffs do not name the executives in the complaint.

Then in February, after revealing that sales of the Fast Ethernet Adapter Cards would be disappointing for the third quarter of 1997, the stock fell to $37 per share.

On March 20, 3Com reported sales for the third quarter, ended Feb. 28, were up 30 percent from the year-ago period to $786.8 million, and net income was $87.6 million, or 47 cents per share, up from 42 cents per share in the same period last year.

Last month the company announced its multibillion-dollar takeover bid for U.S. Robotics Inc. It is unclear when the deal will be finalized.

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