A rising tide doesn't necessarily lift all boats, despite what the adage says. Witness today's divergent news from networking companies 3Com (NASDAQ:COMS) and Cisco Systems (NASDAQ:CSCO).
Coming on the heels of last week's announcement that its August sales were stronger than anticipated, Cisco reported in a regulatory filing today that its order backlog as of September 8 is up 14% over last year, sitting at around $1.6 billion vs. $1.4 billion.
Backlogs represent orders for delivery in the next 90 days, and although Cisco doesn't explicitly connect backlogs to predictions about future sales, the market usually does. Backlog dollar levels are still way below where they were during 2000, but any sign that business IT spending may be coming back to life is welcome.
Cisco's smaller rival 3Com, on the other hand, announced today that it will lay off more people, close a plant in Dublin, and outsource some of its manufacturing. 3Com has struggled in recent years to compete effectively with Cisco, and management hopes that these latest moves will help the company stave off additional pain while strengthening its position in the networking marketplace.
The job cuts will affect about 1,000 people, or a third of 3Com's employees. And over the next six months, 3Com will shift all its manufacturing and distribution of networking products to Flextronics (NASDAQ:FLEX) and Jabil Circuit (NYSE:JBL).
The news from 3Com isn't all gloom and doom, however. It's opening a new Taiwan plant for the design and manufacture of low-end products, and hopes to have the facility fully staffed by May 2004. And the company's joint venture with Cisco's Chinese nemesis Huawei is still underway.
Overall, however, the tone from each company does seem different. 3Com's management reportedly said that today's announcement doesn't reflect current market conditions and that these moves have been planned for a while. The company reports fiscal first-quarter results on September 18, so we'll have to wait until then to see if that's accurate.
