<PAGE>
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q



            /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 1, 2000     COMMISSION FILE NO. 0-12867

                                       OR

            / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        FOR THE TRANSITION PERIOD FROM          TO

                                 --------------

                                3COM CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         DELAWARE                                     94-2605794
--------------------------------                  ------------------
(State or other jurisdiction of                    (I.R.S. Employer
 incorporation or organization)                   Identification No.)

      5400 BAYFRONT PLAZA
     SANTA CLARA, CALIFORNIA                             95052
----------------------------------------               ---------
(Address of principal executive offices)               (Zip Code)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:   (408) 326-5000

FORMER  NAME,  FORMER  ADDRESS AND FORMER  FISCAL  YEAR,  IF CHANGED  SINCE LAST
REPORT: N/A

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                                                  YES ....XX.... NO ............

AS OF SEPTEMBER 29, 2000, 350,076,909 SHARES OF THE REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.

THIS REPORT CONTAINS A TOTAL OF 39 PAGES OF WHICH THIS PAGE IS NUMBER 1.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


<PAGE>


                                3COM CORPORATION

                                TABLE OF CONTENTS






<TABLE>
<CAPTION>
PART I.       FINANCIAL INFORMATION                                                             Page
                                                                                                ----
<S>           <C>                                                                               <C>
ITEM 1.       Financial Statements

                  Condensed Consolidated Statements of Operations
                  THREE MONTHS ENDED SEPTEMBER 1, 2000 AND AUGUST 27, 1999                        3

                  Condensed Consolidated Balance Sheets
                  SEPTEMBER 1, 2000 AND JUNE 2, 2000                                              4

                  Condensed Consolidated Statements of Cash Flows
                  THREE MONTHS ENDED SEPTEMBER 1, 2000 AND AUGUST 27, 1999                        5

                  Notes to Condensed Consolidated Financial Statements                            6

ITEM 2.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations                                                15

ITEM 3.       Quantitative and Qualitative Disclosures About Market Risk                         34



PART II.      OTHER INFORMATION

ITEM 1.       Legal Proceedings                                                                  34

ITEM 2.       Changes in Securities and Use of Proceeds                                          35

ITEM 3.       Defaults Upon Senior Securities                                                    35

ITEM 4.       Submission of Matters to a Vote of Security Holders                                35

ITEM 5.       Other Information                                                                  35

ITEM 6.       Exhibits and Reports on Form 8-K                                                   36


Signatures                                                                                       39
</TABLE>






3Com,  AirConnect,  CommWorks,  SuperStack  and  Total  Control  are  registered
trademarks of 3Com Corporation or its  subsidiaries.  Kerbango is a trademark of
3Com Corporation or its subsidiaries. U.S. Robotics is a registered trademark of
U.S. Robotics Corporation. Courier is a trademark of U.S. Robotics Corporation.


                                       2
<PAGE>

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                                3COM CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                              --------------------------------------
                                                                                  September 1,          August 27,
                                                                                      2000                1999
                                                                              -----------------     ----------------

<S>                                                                             <C>                 <C>
Sales                                                                           $       933,764     $      1,213,196

Cost of sales                                                                           593,036              638,100
                                                                                ---------------     ----------------

Gross margin                                                                            340,728              575,096
                                                                                ---------------     ----------------

Operating expenses:
   Sales and marketing                                                                  236,315              232,414
   Research and development                                                             145,828              148,359
   General and administrative                                                            57,543               53,993
   Amortization of goodwill and acquired intangibles                                      7,493                4,974
   Purchased in-process technology                                                       29,406                -
   Merger-related credits, net                                                             (212)              (2,105)
   Business realignment costs                                                             9,901                -
                                                                                ---------------     ----------------
         Total operating expenses                                                       486,274              437,635
                                                                                ---------------     ----------------

Operating income (loss)                                                                (145,546)             137,461
Gains on investments, net                                                                16,736               23,551
Interest and other income, net                                                           45,630               15,977
                                                                                ---------------     ----------------

Income (loss) from continuing operations before income taxes
   and equity interests                                                                 (83,180)             176,989
Income tax provision (benefit)                                                          (20,795)              49,660
Other interests in loss of consolidated joint venture                                       -                   (975)
Equity interest in loss of unconsolidated investee                                        1,352               -
                                                                                ---------------     ----------------
Net income (loss) from continuing operations                                            (63,737)             128,304

Net income from discontinued operations                                                   4,537               9,187
                                                                                ---------------     ----------------

Net income (loss)                                                               $       (59,200)    $        137,491
                                                                                ===============     ================

Net income (loss) per share:
     Basic:
         Continuing operations                                                  $         (0.18)    $          0.36
         Discontinued operations                                                           0.01                0.03
                                                                                ---------------     ----------------
                                                                                $         (0.17)    $          0.39
                                                                                ===============     ===============
     Diluted:
         Continuing operations                                                  $         (0.18)    $          0.36
         Discontinued operations                                                           0.01                0.02
                                                                                ---------------     ---------------
                                                                                $         (0.17)    $          0.38
                                                                                ===============     ===============
Shares used in computing per share amounts:
     Basic                                                                              353,777             353,243
     Diluted                                                                            353,777             357,703
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>


                                3COM CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except par value)
<TABLE>
<CAPTION>
                                                                            September 1,                 June 2,
                                                                                2000                      2000
                                                                         ---------------          ----------------
                                                                           (Unaudited)
<S>                                                                     <C>                      <C>
ASSETS
Current assets:
   Cash and equivalents                                                  $       965,089          $      1,700,420
   Short-term investments                                                      1,736,619                 1,369,520
   Accounts receivable, net                                                      467,214                   355,540
   Inventories                                                                   273,246                   285,942
   Investments and other                                                         857,984                   655,772
   Net assets of discontinued operations                                            -                    1,058,237
                                                                         ---------------          ----------------
      Total current assets                                                     4,300,152                 5,425,431

Property and equipment, net                                                      697,688                   705,824
Goodwill, intangibles, deposits and other assets                                 356,107                   361,699
                                                                         ---------------          ----------------

      Total assets                                                       $     5,353,947          $      6,492,954
                                                                         ===============          ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                      $       396,335          $        363,497
   Other accrued liabilities                                                     578,440                   607,316
   Income taxes payable                                                           92,344                   169,887
   Deferred income taxes                                                          74,992                    27,317
   Current portion of long-term debt                                               2,255                    14,459
                                                                         ---------------          ----------------
      Total current liabilities                                                1,144,366                 1,182,476
                                                                         ---------------          ----------------

Long-term debt                                                                     2,740                    14,740
Deferred income taxes                                                             67,907                    71,336
Other long term obligations                                                        7,707                     7,377

Equity interest in consolidated entity                                             -                     1,173,961

Stockholders' equity:
   Preferred stock, $.01 par value, 10,000 shares
      authorized; none outstanding                                                 -                        -
   Common stock, $.01 par value, 990,000 shares
      authorized; shares issued:  365,789 and 365,825,
      respectively                                                             2,294,942                 2,101,242
   Treasury stock, at cost, 17,438 and 12,371 shares,
      respectively                                                              (331,538)                 (312,428)
   Unamortized stock-based compensation                                          (25,760)                   (6,450)
   Retained earnings                                                           1,855,129                 1,982,079
   Accumulated other comprehensive income                                        338,454                   278,621
                                                                         ---------------          ----------------
      Total stockholders' equity                                               4,131,227                 4,043,064
                                                                         ---------------          ----------------

      Total liabilities and stockholders' equity                         $     5,353,947          $      6,492,954
                                                                         ===============          ================
</TABLE>


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>




                               3COM CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                -------------------------------------
                                                                                September 1,             August 27,
                                                                                    2000                    1999
                                                                                -------------           -------------

<S>                                                                            <C>                      <C>
Cash flows from operating activities:
     Net income (loss) from continuing operations                               $     (63,737)           $    128,304
     Adjustments to reconcile net income (loss) from
           continuing operations to net cash provided
           by (used in) operating activities:
       Depreciation and amortization                                                   67,589                  79,717
       Loss on disposal of fixed assets                                                 8,622                   2,434
       Gains on investments, net                                                      (16,736)                (23,551)
       Deferred income taxes                                                           (2,871)                 23,423
       Purchased in-process technology                                                 29,406                     -
       Merger-related credits, net                                                       (212)                 (2,105)
       Business realignment costs                                                       9,901                     -
       Other interests in loss of consolidated joint venture                              -                      (975)
       Equity interest in loss of unconsolidated investee                               1,352                     -
       Changes in assets and liabilities, net of acquisition:
           Accounts receivable                                                       (111,673)                156,190
           Inventories                                                                 12,974                  22,658
           Investments and other assets                                               (20,367)                 18,600
           Accounts payable                                                            32,095                  52,780
           Accrued liabilities and other                                              (26,474)                (54,887)
           Income taxes payable                                                       (28,218)                 24,390
                                                                                -------------           -------------
Net cash provided by (used in) operating activities                                  (108,349)                426,978
                                                                                -------------           -------------

Cash flows from investing activities:
     Purchase of investments                                                         (598,118)               (168,461)
     Proceeds from maturities and sales of investments                                179,034                 180,373
     Purchase of property and equipment                                               (59,148)                (38,902)
     Proceeds from sale of property and equipment                                         -                     6,790
     Business acquired in purchase transaction,
         net of cash acquired                                                         (51,741)                    -
     Other, net                                                                         2,348                   8,100
                                                                                -------------           -------------
Net cash used in investing activities                                                (527,625)                (12,100)
                                                                                -------------           -------------

Cash flows from financing activities:
     Issuance of common stock                                                         145,075                  23,436
     Repurchase of common stock                                                      (250,176)               (391,744)
     Repayments of long-term borrowings                                               (24,204)                (12,000)
     Other, net                                                                          (343)                  1,302
                                                                                -------------           -------------
Net cash used in financing activities                                                (129,648)               (379,006)
                                                                                -------------           -------------

Net cash provided by (used in) discontinued operations                                 30,291                 (21,506)

Increase (decrease) in cash and equivalents                                          (735,331)                 14,366
Cash and equivalents, beginning of period                                           1,700,420                 951,771
                                                                                -------------           -------------
Cash and equivalents, end of period                                             $     965,089           $     966,137
                                                                                =============           =============
</TABLE>


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.



                                       5
<PAGE>

                                3COM CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.        Basis of Presentation

          The unaudited condensed consolidated financial statements have been
          prepared by 3Com Corporation ("3Com"), pursuant to the rules and
          regulations of the Securities and Exchange Commission. In the opinion
          of management, these unaudited condensed consolidated financial
          statements include all adjustments necessary for a fair presentation
          of 3Com's financial position as of September 1, 2000, results of
          operations for the three months ended September 1, 2000 and August 27,
          1999, and cash flows for the three months ended September 1, 2000 and
          August 27, 1999. Certain amounts from the prior period have been
          reclassified to conform to the current period presentation. Such
          reclassifications had no effect on net income as previously reported.

          3Com uses a 52 or 53 week fiscal year ending on the Friday nearest to
          May 31. Accordingly, fiscal 2001 will end on June 1, 2001, resulting
          in a 52-week fiscal year, compared to 53 weeks included in fiscal
          2000. The results of operations for the three months ended September
          1, 2000 may not be indicative of the results to be expected for the
          fiscal year ending June 1, 2001. These condensed consolidated
          financial statements should be read in conjunction with the
          consolidated financial statements and related notes thereto included
          in 3Com's Annual Report on Form 10-K for the fiscal year ended June 2,
          2000.

          REVENUE RECOGNITION

          3Com generally recognizes a sale when the product has been shipped,
          risk of loss has passed to the customer, and collection of the
          resulting receivable is probable. 3Com accrues related product return
          reserves, warranty, other post-contract support obligations, and
          royalty expenses at the time of sale. A limited warranty is provided
          on 3Com products for periods ranging from 90 days to the lifetime of
          the product, depending upon the product. Service and maintenance sales
          are recognized over the contract term. 3Com provides limited product
          return and price protection rights to certain distributors and
          resellers. Product return rights are generally limited to a percentage
          of sales over a one to three month period.

          RECENT ACCOUNTING PRONOUNCEMENTS

          In June 1998 and June 1999, the Financial Accounting Standards Board
          ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
          No. 133, "Accounting for Derivative Instruments and Hedging
          Activities," as amended, which requires companies to record
          derivatives on the balance sheet as assets or liabilities, measured at
          fair value. Gains or losses resulting from changes in the values of
          those derivatives would be accounted for depending on the use of the
          derivative and whether it qualifies for hedge accounting. SFAS 133
          will be effective for our fiscal year ending May 31, 2002. 3Com is in
          the process of determining the impact that adoption will have on its
          consolidated financial statements.

          In December 1999, the Securities and Exchange Commission issued Staff
          Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
          Statements." The guidance in SAB 101 must be adopted during our fourth
          quarter of fiscal 2001 and the effects, if any, are required to be
          recorded through a retroactive, cumulative-effect adjustment as of the
          beginning of the fiscal year, with a restatement of all prior interim
          quarters in the year. Management has not completed its evaluation of
          the effects, if any, that SAB 101 will have on 3Com's income statement
          presentation, operating results, or financial position.




                                       6
<PAGE>


2.        Discontinued Operations

          On September 13, 1999, 3Com announced a plan to conduct an initial
          public offering ("IPO") of its Palm, Inc. ("Palm") subsidiary. On
          March 2, 2000, 3Com sold 4.7% of Palm's stock to the public and 1.0%
          of Palm's stock in private placements, resulting in net proceeds of
          $1.2 billion, which were retained by Palm. On May 8, 2000, 3Com's
          Board of Directors declared a special dividend of 3Com's remaining
          interest in Palm to 3Com's shareholders of record on July 27, 2000. On
          July 27, 2000, 3Com distributed its Palm common stock to 3Com
          shareholders. The distribution ratio was 1.4832 shares of Palm for
          each outstanding share of 3Com common stock. No gain was recorded as a
          result of these transactions. The decrease in the intrinsic value of
          3Com's employee stock plans attributable to the distribution of Palm
          was restored in accordance with the methodology set forth in FASB
          Emerging Issues Task Force Issue 90-9, "Changes to Fixed Employee
          Stock Option Plans as a Result of Equity Restructuring." Prior to the
          Palm distribution, there were approximately 35 million employee
          options outstanding. As a result of the Palm distribution, these
          converted to approximately 169 million employee options outstanding,
          of which approximately 60 million were vested and immediately
          exercisable.

          The historical consolidated financial statements of 3Com have been
          restated to account for Palm as a discontinued operation for all
          periods presented. The financial data of Palm reflects the historical
          results of operations and cash flows of the businesses that comprised
          the handheld computing business segment of 3Com during each respective
          period; they do not reflect many significant changes that will occur
          and have occurred in the operations and funding of Palm as a result of
          the separation from 3Com and the IPO. The Palm financial data restated
          as a discontinued operation reflects the assets and liabilities
          transferred to Palm in accordance with the terms of a master
          separation agreement to which Palm and 3Com are parties.

          Discontinued operations include Palm net sales which totaled $188.9
          million and $174.2 million for the period from June 3, 2000 to July
          27, 2000 and the three months ended August 27, 1999, respectively. Net
          income from Palm discontinued operations was reported net of income
          tax expense of $2.7 million, and $6.9 million for the period from June
          3, 2000 to July 27, 2000 and three months ended August 27, 1999,
          respectively. Allocated corporate expenses that ceased after the Palm
          distribution were included in net income from discontinued operations.

3.        Business Realignment Costs

          On March 20, 2000, 3Com announced plans to refocus its business
          strategy, change its growth profile, and streamline its operations.
          The first phase of 3Com's business realignment separated the
          operations of Palm and made Palm an independent company. The second
          phase realigned 3Com's strategy to focus on high-growth markets,
          technologies, and products.

          In connection with the separation of Palm, 3Com incurred business
          realignment costs, which consisted primarily of incremental third
          party costs related to legal and accounting services, strategic
          business planning, information systems separation, development of
          compensation and benefits strategies, and costs to recruit certain key
          Palm management. For the three months ended September 1, 2000, 3Com
          incurred $0.2 million in realignment charges resulting from the
          separation of Palm.

          During fiscal 2000 and continuing through the three months ended
          September 1, 2000, 3Com realigned its strategy to focus on high-growth
          markets, technologies, and products. Operations were restructured
          around two distinct business models: 1) Commercial and Consumer
          Networks Business and 2) Carrier Networks Business. In support of this
          new strategy, 3Com exited its analog-only modem and high-end Local
          Area Network (LAN) and Wide Area Network (WAN) chassis product lines.
          For the three months ended September 1, 2000, 3Com incurred $9.7
          million in realignment charges related to implementing its change in
          strategic focus. Components of accrued business realignment costs and
          changes in accrued amounts as of September 1, 2000 were as follows (in
          thousands):



                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                 Balance at                                                  Balance at
                                                   June 2,            Provision                             September 1,
                                                    2000              (Benefit)          Deductions             2000
                                               ---------------    ----------------    ---------------     ---------------

         <S>                                   <C>                <C>                 <C>                 <C>
          Facilities lease terminations         $         8,300    $         (3,115)   $          (125)    $         5,060
          Long-term asset write-downs                    16,494              12,359            (15,381)             13,472
          Severance and outplacement                     34,212              (2,847)           (15,200)             16,165
          Other restructuring costs                       5,673               3,324             (6,017)              2,980
                                                ---------------    ----------------    ---------------     ---------------
                                                $        64,679    $          9,721    $       (36,723)    $        37,677
                                                ===============    ================    ===============     ===============
</TABLE>



          Severance and outplacement costs related to the termination of
          approximately 2,800 employees. Employee separation costs include
          severance, medical, and other benefits. Employee groups impacted by
          the realignment include personnel involved in duplicate corporate
          services, manufacturing and logistics, product organizations, sales,
          and customer support. As of September 1, 2000, approximately 1,400
          employees had begun the separation process, resulting in $40.9 million
          of employee separation payments. Remaining cash expenditures
          associated with employee separations are estimated to be approximately
          $16.2 million. Employee separations are expected to be substantially
          complete by November 2000, and include 1,200 3Com employees
          transferred to Manufacturers' Services Ltd. (see note 12).

          3Com has substantially completed its realignment initiatives. There
          can be no assurance that the estimated costs of 3Com's business
          realignment activities will not change. Remaining cash expenditures
          relating to the realignment are estimated to be $24.2 million, related
          primarily to employee severance, facility closure, and payments to
          suppliers. Remaining non-cash charges relating to the realignment are
          estimated to be $13.5 million, primarily related to the impairment of
          capital assets associated with the business activities that have been
          exited.

4.        Business Combination

          During the first quarter of fiscal 2001, 3Com acquired Kerbango, Inc.
          ("Kerbango"), developer of the Kerbango-TM- Internet radio, radio
          tuning system, and radio web site. The total purchase consideration,
          including $0.3 million of direct transaction costs, was $73.5 million,
          consisting of cash paid to Kerbango of $52.2 million, issuance of
          restricted stock with a fair value of $17.2 million and stock options
          assumed with a fair value of $3.8 million. In addition, deferred cash
          payments to founders and certain former employees totaling $7.7
          million are contingent upon certain events through July 2002.
          Accordingly, the effect of the deferred cash payments will be recorded
          as the contingent events have been satisfied.

          For financial reporting purposes, the aggregate purchase price,
          excluding deferred cash payments, was reduced by the intrinsic value
          of unvested stock options and restricted stock totaling $20.2 million
          which was recorded as deferred stock-based compensation and is being
          amortized over the respective vesting periods. Approximately $29.4
          million of the aggregate purchase price represented purchased
          in-process technology that had not yet reached technological
          feasibility and had no alternative future use, and accordingly, was
          charged to operations in the first quarter of fiscal 2001. Net
          tangible liabilities acquired, including cash of $0.4 million, were
          approximately $1.7 million at the acquisition date. This purchase
          resulted in $25.6 million of goodwill and other intangible assets that
          are being amortized over estimated useful lives of three to five
          years.


                                       8
<PAGE>


5.        Comprehensive Income

          The components of comprehensive income, net of tax, are as follows (in
          thousands):


<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                ------------------------------
                                                                                 September 1,       August 27,
                                                                                    2000              1999
                                                                                -------------  ---------------

        <S>                                                                    <C>              <C>
         Net income (loss)                                                      $     (59,200)   $     137,491

         Other comprehensive income:
             Change in unrealized gain on available-
                for-sale securities                                                    60,176          251,743
             Change in accumulated translation adjustments                               (343)             144
                                                                                -------------    -------------
         Total comprehensive income                                             $         633    $     389,378
                                                                                =============    =============


6.       Net Income (Loss) Per Share

         The following table presents the calculation of basic and diluted
         earnings per share (in thousands, except per share data):

                                                                                      Three Months Ended
                                                                                ------------------------------
                                                                                September 1,        August 27,
                                                                                    2000              1999
                                                                                -------------    -------------

         Net income (loss) from continuing operations                           $     (63,737)   $     128,304
         Net income from discontinued operations                                        4,537            9,187
                                                                                -------------    -------------
                                                                                $     (59,200)   $     137,491
                                                                                =============    =============

         Weighted average shares-Basic                                                353,777          353,243
         Effect of dilutive securities:
             Employee stock options                                                    -                 4,279
             Restricted stock                                                          -                   181
                                                                                -------------    -------------
         Weighted average shares-Diluted                                              353,777          357,703
                                                                                =============    =============

         Net income (loss) per share-Basic:
             Continuing operations                                              $      (0.18)    $        0.36
             Discontinued operations                                                    0.01              0.03
                                                                                ------------     -------------
                                                                                $      (0.17)    $        0.39
                                                                                ============     =============

         Net income (loss) per share-Diluted:
             Continuing operations                                              $      (0.18)    $        0.36
             Discontinued operations                                                    0.01              0.02
                                                                                ------------     -------------
                                                                                $      (0.17)    $        0.38
                                                                                ============     =============
</TABLE>

          Employee stock options and restricted stock totaling 74.3 million
          shares were not included in the diluted weighted average shares
          calculation for the three months ended September 1, 2000, as the
          effects of these securities were antidilutive.


                                       9
<PAGE>


7.       Inventories

         Inventories consist of (in thousands):

<TABLE>
<CAPTION>
                                                                                September 1,        June 2,
                                                                                    2000              2000
                                                                                -------------    -------------
        <S>                                                                    <C>              <C>
         Finished goods                                                         $     129,987    $     174,420
         Work-in-process                                                               43,846           31,863
         Raw materials                                                                 99,413           79,659
                                                                                -------------    -------------

                                                                                $     273,246    $     285,942
                                                                                =============    =============
</TABLE>


8.       Commitments and Contingencies

         3Com has purchase commitments pertaining to a patent license agreement.
         These purchase commitments extend through the end of calendar 2005 and
         increase from $135 million for calendar 2001 to $180 million for
         calendar 2005. In the event that 3Com does not meet a calendar year
         purchase commitment, penalties due increase from approximately one
         percent to three percent of the annual commitment.

         In July 2000, 3Com committed to purchase certain components from a
         vendor through December 2002. The purchase agreement provides for cash
         penalties to the vendor in the event that minimum purchases are not met
         on a calendar quarter basis. The agreement included a warrant issued to
         3Com to purchase common stock of the vendor. Since the vendor was
         subsequently acquired by another company ("acquirer"), the shares of
         common stock of the vendor were replaced by 992,000 shares of common
         stock of the acquirer under the warrant agreement. The fair value of
         the warrant at the inception of the agreement was fixed at
         approximately $244 million, since the agreement contains significant
         disincentives for nonperformance. The effect of such warrants will be
         recorded as a credit to cost of sales as purchases are made. Future
         minimum purchase commitments, excluding the effect of warrants, are as
         follows (in thousands):
<TABLE>
<CAPTION>
                                                     Purchase
               Fiscal Year                          Commitment
               -----------                        -------------
              <S>                                <C>
                  2001                            $    117,307
                  2002                                 158,288
                  2003                                  84,975
                                                  -------------

                  Total                           $    360,570
                                                  =============
</TABLE>

                                       10
<PAGE>


9.       Stock Repurchase and Option Programs

         During the fourth quarter of fiscal 2000, the Board of Directors
         authorized a stock repurchase program in the amount of up to one
         billion dollars. Such repurchases may be used to offset the issuance of
         additional shares resulting from employee stock option exercises and
         the sale of shares under the employee stock purchase plan. The Board
         has authorized a two-year time limit on the repurchase authorizations.
         This new program replaces previous authorizations totaling 45 million
         shares between June 1998 and September 1999. During the three months
         ended September 1, 2000, 16.1 million shares of common stock were
         repurchased for a cumulative purchase price of $250.2 million.

         In July 2000, 3Com initiated a program of selling put options and
         purchasing call options on its common stock. The put options entitle
         the holders to sell shares of 3Com common stock to 3Com on certain
         dates at specified prices. The call options entitle 3Com to purchase
         its common stock on certain dates at specified prices. As of
         September 1, 2000, 16.5 million put options were outstanding and
         13.0 million call options were outstanding. The put options and call
         options expire between January 2001 and August 2002, with prices
         ranging from $12.95 to $22.17 per share. The option
         contracts give 3Com the choice of net cash settlement or settlement
         in its own shares of common stock. These options are accounted for as
         permanent equity instruments.

10.      Business Segment Information

         The following tables display information on our reportable segments (in
         thousands):

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                ------------------------------
                                                                                September 1,        August 27,
                                                                                    2000              1999
                                                                                -------------    -------------
        <S>                                                                    <C>             <C>
         Sales:
             Commercial and Consumer Networks                                   $     639,106    $     790,008
             Carrier Networks                                                         167,243          129,614
             Exited Product Lines                                                     127,415          293,574
                                                                                -------------    -------------

                                                                                $     933,764    $   1,213,196
                                                                                =============    =============

         Contribution Margin:
             Commercial and Consumer Networks                                   $     100,784    $     289,277
             Carrier Networks                                                          26,234           21,466
             Exited Product Lines                                                     (12,650)          31,542
                                                                                -------------    -------------

                                                                                $     114,368    $     342,285
                                                                                =============    =============
</TABLE>


                                       11
<PAGE>


          A reconciliation of the totals reported for the operating segments to
          the applicable line items in the consolidated financial statements is
          set forth below (in thousands):

<TABLE>
<CAPTION>
                                                                                       Three Months Ended
                                                                                ------------------------------
                                                                                September 1,       August 27,
                                                                                    2000              1999
                                                                                -------------    -------------

        <S>                                                                    <C>              <C>
          Total contribution margin from operating segments                     $     114,368    $     342,285
             Indirect operating expenses (1)                                          220,819          206,929
             Purchased in-process technology                                           29,406            -
             Merger-related credits, net                                                 (212)          (2,105)
             Business realignment costs                                                 9,901            -
                                                                                -------------    -------------
          Total operating income (loss)                                              (145,546)         137,461
             Gains on investments, net                                                 16,736           23,551
             Interest and other income, net                                            45,630           15,977
                                                                                -------------    -------------
          Income (loss) from continuing operations before
             income taxes and equity interests                                  $     (83,180)   $     176,989
                                                                                =============    =============
</TABLE>


          (1)       Indirect operating expenses include expenses that are not
                    directly attributable to an operating segment, such as field
                    sales, corporate marketing, and general and administrative
                    expenses.

11.       Litigation

          We are a party to lawsuits in the normal course of our business.
          Litigation in general, and intellectual property and securities
          litigation in particular, can be expensive and disruptive to normal
          business operations. Moreover, the results of complex legal
          proceedings are difficult to predict. We believe that we have defenses
          in each of the cases set forth below and are vigorously contesting
          each of these matters. An unfavorable resolution of one or more of the
          following lawsuits could adversely affect our business, results of
          operations, or financial condition.

          SECURITIES LITIGATION

          On March 24 and May 5, 1997, securities class action lawsuits,
          captioned HIRSCH V. 3COM CORPORATION, ET AL., Civil Action No.
          CV764977 (HIRSCH), and KRAVITZ V. 3COM CORPORATION, ET AL., Civil
          Action No. CV765962 (KRAVITZ), respectively, were filed against
          3Com and certain of its officers and directors in the California
          Superior Court, Santa Clara County. The complaints allege
          violations of Sections 25400 and 25500 of the California
          Corporations Code and seek unspecified damages on behalf of a class
          of purchasers of 3Com common stock during the period from September
          24, 1996 through February 10, 1997. In late 1999, these cases were
          stayed by the Court, pending resolution of proceedings in the
          EUREDJIAN V. 3COM CORPORATION matter, discussed below. Because the
          EUREDJIAN case has been dismissed, the HIRSCH and KRAVITZ cases are
          no longer stayed. They are in discovery. No trial date has been
          scheduled.

          On February 10, 1998, a securities class action, captioned EUREDJIAN
          V. 3COM CORPORATION, ET AL., Civil Action No. C-98-00508CRB
          (EUREDJIAN), was filed against 3Com and several of its present and
          former officers and directors in United States District Court for the
          Northern District of California asserting the same class period and
          factual allegations as the HIRSCH and KRAVITZ actions. The complaint
          alleges violations of the federal securities laws, specifically
          Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and
          seeks unspecified damages. In May 2000, at the request of plaintiffs,
          the Court dismissed the EUREDJIAN case with prejudice.


                                       12
<PAGE>


          In December 1997, a securities class action, captioned REIVER V. 3COM
          CORPORATION, ET AL., Civil Action No. C-97-21083JW (REIVER), was filed
          in the United States District Court for the Northern District of
          California. Several similar actions have been consolidated into this
          action, including FLORIDA STATE BOARD OF ADMINISTRATION AND TEACHERS
          RETIREMENT SYSTEM OF LOUISIANA V. 3COM CORPORATION, ET AL., Civil
          Action No. C-98-1355. On August 17, 1998, the plaintiffs filed a
          consolidated amended complaint which alleges violations of the federal
          securities laws, specifically Sections 10(b) and 20(a) of the
          Securities and Exchange Act of 1934, and which seeks unspecified
          damages on behalf of a purported class of purchasers of 3Com common
          stock during the period from April 23, 1997 through November 5, 1997.
          3Com has answered an amended complaint and the case is now in
          discovery. No trial date has been scheduled.

          In October 1998, a securities class action lawsuit, captioned ADLER V.
          3COM CORPORATION, ET AL., Civil Action No. CV777368 (ADLER), was filed
          against 3Com and certain of its officers and directors in the
          California Superior Court, Santa Clara County, asserting the same
          class period and factual allegations as the REIVER action. The
          complaint alleges violations of Sections 25400 and 25500 of the
          California Corporations Code and seeks unspecified damages. By
          agreement of the parties, this case will be stayed to allow the REIVER
          case to proceed.

          On May 11, 1999, a securities class action, captioned GAYLINN V. 3COM
          CORPORATION, ET AL., Civil Action No. C-99-2185 MMC (Gaylinn), was
          filed against 3Com and several of its present and former officers and
          directors in United States District Court for the Northern District of
          California. Several similar actions have been consolidated into the
          GAYLINN action. On September 10, 1999, the plaintiffs filed a
          consolidated complaint which alleges violations of the federal
          securities laws, specifically Sections 10(b) and 20(a) of the
          Securities Exchange Act of 1934, and seeks unspecified damages on
          behalf of a purported class of purchasers of 3Com common stock during
          the period from September 22, 1998 through March 2, 1999. In January
          2000, the Court dismissed the complaint. In February 2000, plaintiffs
          filed an amended complaint. In June 2000, the Court dismissed the
          amended complaint without prejudice. Plaintiffs filed another amended
          complaint. On July 24, 2000, the Company filed a motion to dismiss the
          latest amended complaint. In September 2000, the Court dismissed the
          amended complaint with prejudice.

          INTELLECTUAL  PROPERTY

          On April 28, 1997, Xerox  Corporation filed suit against U.S.
          Robotics Corporation and U.S. Robotics Access Corp. in the United
          States District Court for the Western District of New York. The
          case is now captioned XEROX CORPORATION V. U.S. ROBOTICS
          CORPORATION, U.S. ROBOTICS ACCESS CORP., PALM COMPUTING, INC. AND
          3COM CORPORATION (Civil Action Number 97-CV-6182T). The Complaint
          alleged willful infringement of United States Patent Number
          5,596,656, entitled "Unistrokes for Computerized Interpretation of
          Handwriting." The Complaint sought to permanently enjoin the
          defendants from infringing the patent in the future. In an Order
          entered by the Court on June 6, 2000, the Court granted the
          defendants' motion for summary judgment of non-infringement, and
          the case was dismissed in its entirety. Xerox has appealed the
          dismissal to the U.S. Court of Appeals for the Federal Circuit.

          On May 26, 2000 3Com Corporation filed a patent infringement lawsuit
          against Xircom, Inc. The lawsuit, filed in the United States District
          Court for the District of Utah (2:00CV-0436G), alleges infringement of
          3Com's patent numbers 6,012,953, 5,532,898 and 5,777,836. On September
          21, 2000 in the United States District Court for the Central District
          of California (00-10198 WJR), Xircom Corporation filed suit against
          3Com Corporation alleging infringement of Xircom's U.S. Patent Numbers
          5,773,332, 5,940,275, 6,115,257 and 6,095,851. 3Com is currently
          investigating the lawsuit filed by Xircom.


                                       13
<PAGE>



12.       Subsequent Events

          On September 5, 2000, 3Com finalized the sale of a 39-acre parcel
          of undeveloped land in San Jose, California to Palm, Inc., who
          simultaneously assigned its rights under the land purchase and sale
          agreement to a third party. 3Com expects to record a gain of
          approximately $175 million related to this sale in its second fiscal
          quarter.

          On September 30, 2000, 3Com finalized the sale of its manufacturing
          and distribution operations, located in Mt. Prospect, Illinois to
          Manufacturers' Services Ltd. ("MSL"). In this transaction, 3Com
          received approximately $60 million in cash and 1.5 million shares
          of common stock of MSL valued at approximately $18 million. For the
          next two years, 3Com has committed to purchase a minimum level of
          manufacturing volume from MSL. On September 30, 2000, the
          manufacturing and distribution operations, including approximately
          1,200 3Com employees, were transferred to MSL. 3Com expects to
          record a loss of approximately $11 million related to this sale in
          its second fiscal quarter.

                                       14
<PAGE>



          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS


          This report on Form 10-Q contains forward-looking statements,
          including statements concerning our expectation that employee
          separations will be substantially complete by November 2000, our plan
          to invest a significant portion of our financial resources towards
          developing products for our targeted emerging growth markets, our
          estimate of expenses in connection with the completion of acquired
          research and development projects, our plans to make strategic
          investments, our belief that our cash and cash equivalents, short-term
          investments, and cash generated from operations will be sufficient to
          satisfy our anticipated cash requirements for at least the next 12
          months, our expectation that both sales and operating income will
          continue to be negatively impacted and that we will report operating
          losses in fiscal 2001, our expectation that our high growth emerging
          product lines will account for a higher percentage of our sales over
          time, our expectation that gross margins for our high growth emerging
          product lines on a stand-alone basis may be significantly lower than
          gross margins for networking products traditionally sold to larger
          businesses, our expectation that we will increase our commitment to
          and become increasingly reliant upon our two-tiered distribution model
          as well as sales to OEMs, our plans to develop our carrier channel
          through expanded partnerships with Internet and other competitive
          service providers, our expectation that significant returns or order
          cancellations will not occur beyond the second quarter of fiscal 2001,
          and our expectation that international markets will continue to
          account for a significant portion of our sales. These statements are
          subject to certain risks and uncertainties. Some of the factors that
          could cause future events or results to materially differ from those
          projected in the forward-looking statements are discussed below.

          STRATEGIC FOCUS

          On March 20, 2000, we announced plans to realign our strategy to focus
          on high-growth markets, technologies, and products. We have now
          substantially completed our business transformation. In our commercial
          market, we have exited from our high-end LAN and WAN chassis product
          lines, and in our consumer market we have exited from our analog-only
          modem product line. We now focus on specific sectors of the
          commercial, consumer, and carrier markets, and have structured our
          operations around two distinct business models: 1) Commercial and
          Consumer Networks Business and 2) Carrier Networks Business.

          The Commercial and Consumer Networks Business is implementing a
          web-enabled business model to deliver our products and services to
          millions of customers. The focus of our Commercial and Consumer
          Networks Business is on targeted sectors within the commercial and
          consumer markets. The consumer market comprises individuals and
          families who we believe want user-friendly connections at home and on
          the go. Building upon our market position in consumer broadband
          access, we will concentrate on home networks and Internet appliances,
          a new consumer-oriented product category we intend to define and lead.
          Our commercial market includes all businesses with small to midsize
          networked sites. Since these customers do not typically have their own
          onsite Information Technology (IT) group, they look to us for simple
          solutions that give them connectivity without burdening them with
          technical complexity and high costs. We are continuing to provide
          large enterprises with products and solutions for their small to
          midsize locations.

          The Carrier Networks Business uses a targeted, direct sales business
          model to create service delivery solutions for our carrier and network
          service provider customers. The focus of our Carrier Networks Business
          is on carrier-class access infrastructures and Internet Protocol (IP)
          services platforms for the network service provider market. We offer
          our carrier customers robust, scalable multi-service platforms that
          allow them to deploy revenue-enhancing services over dial-up,
          Integrated Services Digital Network (ISDN), broadband, and wireless
          access infrastructures.



                                       15
<PAGE>




RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage of
total sales represented by the line items reflected in 3Com's condensed
consolidated income statements:

<TABLE>
<CAPTION>
                                                                                     Quarter Ended
                                                                                     -------------
                                                                     September 1,        June 2,         August 27,
                                                                        2000              2000            1999
                                                                     ------------      ----------       -----------
<S>                                                                    <C>               <C>              <C>
Sales                                                                   100.0 %           100.0 %          100.0 %
Cost of sales                                                            63.5              74.2             52.6
                                                                       ------           -------           ------
Gross margin                                                             36.5              25.8             47.4
Operating expenses:
     Sales and marketing                                                 25.3              32.1             19.2
     Research and development                                            15.6              20.3             12.2
     General and administrative                                           6.2               7.0              4.5
     Amortization of goodwill and acquired intangibles                    0.8               1.1              0.4
     Purchased in-process technology                                      3.1               1.4              -
     Merger-related credits, net                                          -                 -               (0.2)
     Business realignment costs                                           1.1               8.4              -
                                                                       ------           -------           ------
         Total operating expenses                                        52.1              70.3             36.1
                                                                       ------           -------           ------
Operating income (loss)                                                 (15.6)            (44.5)            11.3
Gains on investments, net                                                 1.8              11.7              2.0
Interest and other income, net                                            4.9               5.4              1.3
                                                                       ------           -------           ------
Income (loss) from continuing operations
     before income taxes and equity interests                            (8.9)            (27.4)            14.6
Income tax provision (benefit)                                           (2.2)             (6.8)             4.1
Other interests in loss of
     consolidated joint venture                                           -                 -               (0.1)
Equity interest in loss of
     unconsolidated investee                                              0.1               0.3              -
                                                                       ------           -------           ------
Net income (loss) from continuing operations                             (6.8)            (20.9)            10.6

Net income from discontinued operations                                   0.5               1.7              0.7
                                                                       ------           -------           ------

Net income (loss)                                                        (6.3)%           (19.2)%           11.3 %
                                                                       ======             =====           ======

Pro forma:
     Operating expenses                                                  47.1 %            59.4 %           35.8 %
     Operating income (loss)                                            (10.6)            (33.6)            11.6
     Net income (loss)                                                   (4.4)            (21.4)             9.4
</TABLE>


Pro forma results exclude the following, net of taxes: amortization of goodwill
and acquired intangibles, purchased in-process technology, merger-related
credits, net, business realignment costs, gains on investments, net, and net
income from discontinued operations.




                                       16
<PAGE>


The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.

SALES

Sales in the first quarter of fiscal 2001 totaled $933.8 million, a decrease of
$279.4 million, or 23 percent, compared to the same quarter one year ago, and an
increase of $170.1 million or 22 percent sequentially from the fourth quarter of
fiscal 2000.

COMMERCIAL AND CONSUMER NETWORKS. Commercial and consumer network systems
products include traditional access products (desktop Network Interface Cards
(NICs), advanced access products (gigabit NICs, server NICs, mobile NICs,
wireless LAN products), LAN/WAN infrastructure products (LAN switches, LAN hubs,
Internet access products, network management products), LAN telephony products,
services, broadband connections, home networking products, and Internet
appliances.

Sales of commercial and consumer networks products in the first quarter of
fiscal 2001 decreased 19 percent compared to the same quarter one year ago and
increased 24 percent sequentially, compared to the fourth quarter of fiscal
2000. We do not believe that meaningful comparisons can be made to the same
quarter a year ago because of dramatic changes caused by our business
realignment. Likewise, we believe that meaningful sequential comparisons cannot
be made as the growth rate was substantially impacted by the stabilization and
recovery of our business in the first quarter of fiscal 2001. The decline in
sales from the same quarter one year ago was due primarily to competitive
pressures in the LAN Workgroup Systems market and lower average selling prices
for our desktop NIC products due to an increase in the proportion of sales of
these products to Original Equipment Manufacturers (OEMs). These declines were
partially offset by increased sales of our high-growth emerging technology
products. The sequential sales increase from the fourth quarter of fiscal 2000
was due to the stabilization and recovery of the business as well as increased
sales of our high growth emerging technology products. During the fourth quarter
of fiscal 2000, sales were depressed due to uncertainty caused by our business
realignment and our efforts to reduce channel inventory. Sales of commercial and
consumer network products in the first quarter of fiscal 2001 represented 68
percent of total sales compared to 65 percent in the first quarter of fiscal
2000 and 68 percent in the fourth quarter of fiscal 2000.

CARRIER NETWORKS. Carrier networks products include enhanced data services
(remote access services (RAS)) and new technologies (IP telephony, wireless,
cable access and Digital Subscriber Line (DSL) access) and customer service and
support.

Sales of carrier network products in the first quarter of fiscal 2001 increased
29 percent compared to the same quarter one year ago and 7 percent sequentially
from the fourth quarter of fiscal 2000. Sales of carrier network products during
the first quarter of fiscal 2001 represented 18 percent of total sales compared
to 11 percent of total sales in the first quarter of fiscal 2000, and 21 percent
of total sales in the fourth quarter of fiscal 2000. The increase in sales, both
sequentially and compared to the same period one year ago, was due primarily to
a continuing shift in our product mix from traditional RAS products towards new
technologies.

EXITED PRODUCT LINES. Sales of exited product lines (analog-only modems and
high-end LAN and WAN chassis products) in the first quarter of fiscal 2001
decreased 57 percent compared to the same quarter one year ago and increased 42
percent sequentially from the fourth quarter of fiscal 2000. The decrease in
sales of exited product lines as compared to the same period one year ago was
due to the impact of our business realignment and change in strategic focus. The
sequential increase was principally due to an increase in sales of our exited
products as customers made final purchases, partially offset by product returns.



                                       17
<PAGE>


GEOGRAPHIC. In the first quarter of fiscal 2001, U.S. sales decreased 27 percent
and international sales decreased 18 percent compared to the same period one
year ago. The year-over-year decrease in international sales was primarily due
to weaker sales in Europe, reflecting a 30 percent decrease, partially offset by
stronger sales in the Asia Pacific and Latin American regions. U.S. sales in the
first quarter of fiscal 2001 represented 50 percent of total sales, compared to
53 percent of total sales in the first quarter of fiscal 2000 and 48 percent of
total sales in the fourth quarter of fiscal 2000. U.S. sales and international
sales increased by 27 percent and 17 percent, respectively, sequentially from
the fourth quarter of fiscal 2000.

GROSS MARGIN
Gross margin as a percentage of sales was 37 percent in the first quarter of
fiscal 2001, compared to 47 percent in the first quarter of fiscal 2000 and 26
percent in the fourth quarter of fiscal 2000. The year-over-year decrease in the
gross margin percentage was affected by significantly lower gross margins on
sales of exited product lines. The sequential increase in the gross margin
percentage was due to one-time charges of $55.5 million dollars within cost of
sales in the fourth quarter of fiscal 2000, primarily related to excess and
obsolete inventory, warranty reserves, and return and rebate programs in
connection with the exited product lines. These one-time charges were not as
significant in the first quarter of fiscal 2001.

OPERATING EXPENSES
Operating expenses in the first quarter of fiscal 2001 were $486.3 million, or
52 percent of sales, compared to $437.6 million, or 36 percent of sales in the
first quarter of fiscal 2000 and $536.9 million, or 70 percent of sales in the
fourth quarter of fiscal 2000. Operating expenses in the first quarter of fiscal
2001 included amortization of goodwill and acquired intangibles of $7.5 million,
purchased in-process technology of $29.4 million, net merger-related credits of
$0.2 million, and business realignment costs of $9.9 million. Operating expenses
in the first quarter of fiscal 2000 included amortization of goodwill and
acquired intangibles of $5.0 million and net merger-related credits of $2.1
million. Operating expenses in the fourth quarter of fiscal 2000 included
amortization of goodwill and acquired intangibles of $8.6 million, purchased
in-process technology of $10.6 million, net merger-related credits of $0.2
million, and business realignment costs of $64.2 million. Excluding these
unusual items, operating expenses for the first quarter of fiscal 2001 were
$439.7 million, or 47 percent of sales, compared to $434.8 million, or 36
percent of sales in the first quarter of fiscal 2000 and $453.7 million, or 59
percent of sales in the fourth quarter of fiscal 2000.

SALES AND MARKETING. Sales and marketing expenses in the first quarter of fiscal
2001 increased $3.9 million, or two percent, compared to the first quarter of
fiscal 2000, and increased to 25 percent of total sales for the first quarter of
fiscal 2001, compared to 19 percent of total sales for the first quarter of
fiscal 2000. Sales and marketing expenses in the first quarter of fiscal 2001
decreased $8.6 million, or four percent sequentially, from the fourth quarter of
fiscal 2000, and decreased to 25 percent of total sales in the first quarter of
fiscal 2001, compared to 32 percent of total sales for the fourth quarter of
fiscal 2000. The year-over-year increase was due significantly to brand
advertising and marketing campaigns to promote a new 3Com brand identity,
partially offset by lower sales force expenses. The sequential decrease was
significantly attributable to lower sales force expenses that were partially
offset by increased spending on our new brand advertising and marketing
campaigns.

RESEARCH AND DEVELOPMENT. Research and development expenses in the first quarter
of fiscal 2001 decreased $2.5 million, or two percent, compared to the first
quarter of fiscal 2000, and increased to 16 percent of sales in the first
quarter of fiscal 2001 compared to 12 percent of total sales in the first
quarter of fiscal 2000. Research and development expenses in the first quarter
of fiscal 2001 decreased $9.5 million, or six percent, from the fourth quarter
of fiscal 2000, and decreased to 16 percent of total sales in the first quarter
of fiscal 2001 compared to 20 percent of total sales in the fourth quarter of
fiscal 2000. As a result of our exit from our analog-only modem and high-end LAN
and WAN chassis product lines, we have substantially reduced our research and
development activities for these products. Nevertheless, we are continuing to
invest heavily in research and development, placing a strong focus on our
targeted emerging growth markets. We plan to continue to invest a significant
proportion of our financial resources towards developing products for these
markets.


                                       18
<PAGE>


GENERAL AND ADMINISTRATIVE. General and administrative expenses in the first
quarter of fiscal 2001 increased $3.6 million, or seven percent, compared to the
first quarter of fiscal 2000, and increased to six percent of total sales in the
first quarter of fiscal 2001 compared to four percent of total sales in the
first quarter of fiscal 2000. General and administrative expenses in the first
quarter of fiscal 2001 increased $4.1 million, or eight percent, from the fourth
quarter of fiscal 2000, and decreased to six percent of total sales in the first
quarter of fiscal 2001 compared to seven percent of total sales in the fourth
quarter of fiscal 2000. The increase in general and administrative expenses
compared to the same period one year ago was due primarily to increased
consulting costs associated with our business realignment activities, partially
offset by lower spending for employee incentive programs. The sequential
increase in general and administrative expenses was due significantly to an
increase in the general allowance for bad debts, partially offset by lower
spending for employee incentive programs.

AMORTIZATION OF GOODWILL AND ACQUIRED INTANGIBLES. Amortization of goodwill and
acquired intangibles in the first quarter of fiscal 2001 increased $2.5 million,
or 51 percent, compared to the first quarter of fiscal 2000 and decreased $1.1
million, or 13 percent, sequentially from the fourth quarter of fiscal 2000.
Amortization of goodwill and acquired intangibles includes the amortization of
goodwill, assembled workforce, customer relationships, developed technology and
licenses and non-compete agreements acquired in purchase business combinations.

PURCHASED IN-PROCESS TECHNOLOGY. During the first quarter of fiscal 2001, 3Com
acquired Kerbango, Inc. ("Kerbango"), the developer of the Kerbango Internet
radio, radio tuning system, and radio web site. In connection with this
acquisition, 3Com recorded a charge for purchased in-process technology of
approximately $29.4 million. During the fourth quarter of fiscal 2000, 3Com
recorded a charge of $10.6 million for purchased in-process technology related
to the acquisition of Call Technologies, Inc ("Call Technologies"). As of the
acquisition dates, purchased-in-process technology was approximately 75% and
50-75% complete for Kerbango and Call Technologies projects, respectively. We
are continuing development of four projects, and have spent approximately $8.0
million as of September 1, 2000. As of September 1, 2000, we estimate that
approximately $3.5 million will be spent to complete acquired research and
development projects. We estimate that all projects currently in process will be
completed by March 2001.

MERGER-RELATED CREDITS, NET. During the first quarter of fiscal 2001, we
recorded a net pre-tax credit of approximately $0.2 million related to
reductions in the estimates for remaining charges associated with the U.S.
Robotics merger. During the first quarter of fiscal 2000, we recorded a net
pre-tax credit of approximately $2.1 million, associated with the U.S. Robotics
merger. During the fourth quarter of fiscal 2000, we recorded a net pre-tax
credit of approximately $0.2 million, associated with the U.S. Robotics merger.

BUSINESS REALIGNMENT COSTS. Business realignment costs in the first quarter of
fiscal 2001 were $9.9 million, and represented costs related to steps we took to
refocus our business strategy, change our growth profile and streamline our
operations. These costs included $0.2 million related to the separation of Palm
and $9.7 million related to the realignment of our strategy to focus on high
growth markets, technologies and products. During the first quarter of fiscal
2000, we did not record any business realignment costs. During the fourth
quarter of fiscal 2000, business realignment costs of $64.2 million were
recorded, of which $5.2 million related to the separation of Palm from 3Com and
$59.0 million related to implementing our change in strategic focus.

GAINS ON INVESTMENTS, NET
Gains on investments, net, in the first quarter of fiscal 2001 were $16.7
million, due primarily to gains from investments in limited partnership venture
capital funds. During the first quarter of fiscal 2000, gains on investments,
net were $23.5 million due to sales of investments in equity securities, and
during the fourth quarter of fiscal 2000 gains on investments, net were $89.0
million due primarily to sales of investments in equity securities.


                                       19
<PAGE>


INTEREST AND OTHER INCOME, NET
Interest and other income, net, in the first quarter of fiscal 2001 increased
$29.6 million compared to the first quarter of fiscal 2000. Interest and other
income, net, in the first quarter of fiscal 2001 increased $4.1 million compared
to the fourth quarter of fiscal 2000. The increase in interest and other income,
net compared to the same period one year ago was due primarily to higher
interest income as a result of higher cash and investment balances. The increase
in interest and other income sequentially from the fourth quarter of fiscal 2000
was primarily due to a shift in investment mix from tax exempt to taxable agency
instruments that provide higher nominal yields and reduction in interest expense
due to the repayment of long-term debt.

INCOME TAX PROVISION
Our effective income tax rate was a 25.0 percent benefit for the first quarter
of fiscal 2001, compared to a 28.1 percent expense for the first quarter of
fiscal 2000. The change in the tax rate compared to the same period one year ago
was primarily attributable to changes in our market focus, increased tax exempt
investment income and the relative mix of income (or loss) in jurisdictions
taxed at rates greater than (or less than) the U.S. rate.

OTHER INTERESTS IN LOSS OF CONSOLIDATED JOINT VENTURE
In January 1999, we entered into a joint venture named ADMTek, Inc. ("ADMTek"),
and began consolidating the joint venture with our results, due to our ability
to exercise significant influence over operating and financial policies of the
joint venture. In September 1999, we sold a portion of our existing interest in
ADMTek to our joint venture partner. As a result of this sale, our ownership
interest was reduced to 19 percent and we no longer have the ability to exercise
significant influence over the joint venture. During the second quarter of
fiscal 2000, we began accounting for this investment using the cost method. For
the first quarter of fiscal 2000, the pro-rata share of the joint venture loss
allocated to other investors was $1.0 million.

EQUITY INTEREST IN LOSS OF UNCONSOLIDATED INVESTEE
In August 1999, we invested $7.5 million in OmniSky Corporation ("OmniSky"). We
currently control approximately 22 percent of the equity interests in OmniSky.
We are accounting for this investment using the equity method. For the first
quarter of fiscal 2001, we recorded $1.4 million as our equity interest in the
loss of Omnisky.

NET INCOME (LOSS) FROM CONTINUING OPERATIONS
Net loss from continuing operations for the first quarter of fiscal 2001 was
($63.7) million, or ($0.18) per share, compared to net income of $128.3 million
or $0.36 per share for the first quarter of fiscal 2000 and a net loss of
($159.4) million or ($0.45) per share for the fourth quarter of fiscal 2000.

NET INCOME FROM DISCONTINUED OPERATIONS
Net income from discontinued operations includes the results of operations of
Palm. Net income from discontinued operations for the period from June 3, 2000
through July 27, 2000 was $ 4.5 million, or $0.01 per share, compared to $9.2
million, or $0.02 per share for the first quarter of fiscal 2000 and net income
of $12.5 million, or $0.03 per share for the fourth quarter of fiscal 2000.

NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE
Net loss for the first quarter of fiscal 2001 was ($59.2) million, or ($0.17)
per share, compared to net income of $137.5 million, or $0.38 per share for the
first quarter of fiscal 2000 and a net loss of ($146.8) million, or ($0.42) per
share, for the fourth quarter of fiscal 2000. Excluding amortization of goodwill
and purchased intangibles, purchased in-process technology, merger-related
credits, business realignment costs, net gains on investments and net income
from discontinued operations, pro forma net income (loss) was ($41.3) million,
or ($0.12) per share for the first quarter of fiscal 2001; $113.7 million, or
$0.32 per share for the first quarter of fiscal 2000; and ($163.7) million, or
($0.47) per share for the fourth quarter of fiscal 2000.


                                       20
<PAGE>




LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents and short-term investments at September 1, 2000 were $2.7
billion, a decrease of $.4 billion, or 13 percent, compared to the balance of
$3.1 billion at June 2, 2000.

For the first quarter of fiscal 2001, net cash used in operating activities was
$108.3 million. Accounts receivable at September 1, 2000 increased $111.7
million from June 2, 2000 to $467.2 million. Days sales outstanding in
receivables increased to 45 days at September 1, 2000, compared to 42 days at
June 2, 2000, primarily due to a higher percentage of sales in the last month of
the quarter. Inventory levels at September 1, 2000 decreased $12.7 million from
June 2, 2000 to $273.2 million. Annualized inventory turnover improved to 8.5
turns for the first quarter of fiscal 2001, compared to 8.0 turns for the fourth
quarter of fiscal 2000.

During the first quarters of fiscal 2001 and 2000, we made investments totaling
$598.1 million and $168.5 million, respectively, comprised primarily of
investments in municipal and corporate bonds and government agency instruments.
For the first quarters of fiscal 2001 and 2000, proceeds from maturities and
sales of investments were $179.0 million and $180.4 million, respectively,
related primarily to the maturities of investments in municipal and corporate
bonds and government agency instruments.

As part of our 3Com Ventures initiative, we selectively make strategic
investments in the equity securities of privately held companies and limited
partnership venture capital funds. We believe these investments will complement
our business opportunities and research and development activities. We have
established 3Com Ventures II, which has made strategic investments of $42
million and plans to make additional investments of $208 million.

During the first quarter of fiscal 2001, 3Com made $59.1 million in capital
expenditures. Major capital expenditures included upgrades and expansion of our
facilities and purchases and upgrades of software and computer equipment. As of
September 1, 2000, we had approximately $5.8 million in capital expenditure
commitments outstanding primarily associated with the expansion of our
facilities and purchases and upgrades of software and computer equipment. In
addition, we have commitments related to operating lease arrangements in the
U.S., under which we have an option to purchase the properties for an aggregate
of $322.2 million, or arrange for the sale of the properties to a third party.
If the properties are sold to a third party at less than the option price, 3Com
retains an obligation for the shortfall, subject to certain provisions of the
lease.

During the first quarter of fiscal 2001, we used cash of $51.7 million, net of
cash acquired, in the purchase of Kerbango, Inc.

During the fourth quarter of fiscal 2000, our Board of Directors authorized a
stock repurchase program of up to one billion dollars. Such repurchases could be
used to offset the issuance of additional shares resulting from employee stock
option exercises and the sale of shares under the employee stock purchase plan.
The Board has authorized a two-year time limit on the repurchase authorizations.
This new program replaces previous authorizations totaling 45 million shares
between June 1998 and September 1999. During the first quarter of fiscal 2001,
we repurchased 16.1 million shares of our common stock at a total purchase price
of $250.2 million.

During the first quarter of fiscal 2001, we initiated a program of selling
put options and purchasing call options on our common stock. The put options
entitle the holders to sell shares of 3Com common stock to us on certain
dates at specified prices. The call options entitle us to purchase our common
stock on certain dates at specified prices. As of September 1, 2000, 16.5
million put options were outstanding and 13.0 million call options were
outstanding. The put options and call options expire between January 2001 and
August 2002, with prices ranging from $12.95 to $22.17 per share. The option
contracts give us the choice of net cash settlement or settlement in shares
of our own common stock. These options are accounted for as permanent equity
instruments.

                                       21
<PAGE>


During the first quarter of fiscal 2001, we received net cash of $145.1 million
from the sale of our common stock to employees through our employee stock
purchase and option plans. During the same quarter one year ago, we received net
cash of $23.4 million from the sale of our common stock to employees through our
employee stock purchase and option plans. During the first quarter of fiscal
2001, we recorded a tax benefit on stock option transactions of $49.3 million.
During the same quarter one year ago, we recorded a tax benefit on stock option
transactions totaling $14.6 million.

During the first quarter of fiscal 2001, we repaid the remaining debt balance of
$24 million under the 7.52% Unsecured Senior Notes agreement.

Based on current plans and business conditions, we believe that our existing
cash and equivalents, short-term investments, and cash generated from operations
will be sufficient to satisfy anticipated cash requirements for at least the
next twelve months.


EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 and June 1999, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, which requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. SFAS 133 will be effective for
3Com's fiscal year ending May 31, 2002. 3Com is in the process of determining
the impact that adoption will have on its consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The
guidance in SAB 101 must be adopted during 3Com's fourth quarter of fiscal 2001
and the effects, if any, are required to be recorded through a retroactive,
cumulative-effect adjustment as of the beginning of the fiscal year, with a
restatement of all prior interim quarters in the year. Management has not
completed its evaluation of the effects, if any, that SAB 101 will have on
3Com's income statement presentation, operating results, or financial position.




                                       22
<PAGE>


BUSINESS ENVIRONMENT AND RISK FACTORS

Our future results may be affected by industry trends and specific risks in our
business. Some of the factors that could cause future results to materially
differ from past results or those described in forward-looking statements
include those discussed below.

STRATEGIC FOCUS AND COMPLETION OF BUSINESS TRANSITION

Since announcing our realignment plans on March 20, 2000, we have been
transitioning our business and realigning our strategic focus towards
high-growth markets, technologies, and products. We have exited our
analog-only modem and high-end LAN and WAN chassis product lines. These
product lines presented characteristics for revenue growth and profitability
that did not meet our target financial model.

Our new strategic focus requires re-allocation of resources, investing in new
technologies, partnering with other companies, and establishing leadership
positions in new high-growth markets. Proper timing and execution in identifying
key product lines and market opportunities, developing products and technology
and commercializing products are essential for us to be successful in our new
strategic focus. Many factors may impact our ability to implement this new
strategic focus, including our ability to sustain the productivity of our
workforce and recruit and retain talented personnel, to introduce innovative new
products in a timely manner, to successfully adopt a business model appropriate
for these high-growth and emerging product lines, to adequately secure component
supply for these high-growth and emerging product lines, to reduce operating
expenses, and to quickly respond to and recover from unforeseen events
associated with our business transformation. Internal and external changes
resulting from our business transformation are still on-going and may disrupt
our customers, partners, distributors, and employees and create a prolonged
period of uncertainty, which could have a material adverse affect on our
business.

As a result of our business transition and realignment, it continues to be
difficult to forecast our financial performance. However, we expect that both
sales and operating income will continue to be negatively impacted, and we
expect to report operating losses in fiscal 2001. As we implement the
transformation of 3Com, our goal will be to post operating profits by our fourth
fiscal quarter of fiscal 2001 and to make further improvements during fiscal
2002.

NEW PRODUCT LINES AND MARKETS

Our financial performance and future growth depend upon the rapid growth of new
markets, and our ability to establish a leadership position in those markets. We
are investing a significant proportion of our resources in several emerging
product lines in markets that are expected to grow at a significantly higher
rate than the networking industry average. We expect these product lines to
account for a higher percentage of our sales over time. We are focused on the
following products and solutions, leveraging our investments in broadband,
wireless, IP telephony and digital home technologies:

          -         LAN Telephony and Voice over IP Services
          -         Broadband (cable and DSL) modems and headend equipment
          -         Wireless  LAN  and  Code  Division  Multiple  Access  (CDMA)
                    Solutions
          -         Home Networking
          -         Internet Appliances

At the present time, the markets for these products and solutions are still
emerging. Industry standards for these technologies are yet to be widely adopted
and the market potential remains unproven. If these markets do not grow at a
significant rate or if we do not increase our sales in these product lines, our
financial results could be adversely affected.


                                       23
<PAGE>


Additionally, we expect that the business models for these high-growth and
emerging product lines, especially product lines which are more consumer and
retail-oriented, may be different from the business model for our traditional
networking products. We anticipate that gross margins for such products on a
standalone basis may be significantly lower than gross margins for networking
products traditionally sold to larger businesses. Therefore, 3Com must
successfully adopt business models for such product lines that incorporate
additional revenue generators, such as selling or bundling other higher margin
services or products along with sales of these products, and that incorporate
continued improvement in the cost of sales for these products. If we are not
able to adopt or implement successful business models for these product lines,
our overall gross margins may be negatively impacted which could adversely
affect our financial results.

ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS

Products in the markets in which we compete have short life cycles.
Therefore, our success depends on our ability to identify new market and
product opportunities, to develop and introduce new products in a timely
manner, and to gain market acceptance of new products, particularly in our
targeted high-growth, emerging markets. For example, timely introductions
of the following products are important to our success:

          -         a next-generation carrier-class platform for certain
                    applications in IP Telephony and third-generation (3G)
                    wireless solutions for our carrier customers
          -         a new line of Gigabit-on-Copper LAN solutions primarily for
                    commercial enterprises
          -         a new line of broadband modems (both cable and DSL) that
                    support data and voice
          -         new standards-based wireless LAN solutions, including our
                    AirConnect-Registered Trademark- wireless LAN, for both
                    commercial and consumer markets
          -         a new generation of residential Internet appliances
          -         a next generation SuperStack-Registered Trademark-
                    workgroup solution for commercial enterprises

Any delay in new product introductions, lower than anticipated demand for our
new products or higher manufacturing costs could have an adverse affect on our
operating results or financial condition, particularly in those product markets
we have identified as emerging high-growth opportunities.

SUPPLY CHAIN MANAGEMENT

3Com has a long-term objective to become best-in-class at managing its supply
chain. Significant progress has been made in balancing the resources and
operations required to achieve the highest levels of customer satisfaction and
on-time delivery. The balancing of customer requirements and financial metrics
reflects an equilibrium between dynamic elements. Such factors may include
external conditions such as component shortages, fluctuations in worldwide
demand, and industry consolidation.

Some key components of our products and some services, which we rely on, are
currently available only from single or limited sources. In addition, some of
our suppliers are also our competitors. While we generally have been able to
obtain adequate supplies of components from existing sources, we cannot be
certain that in the future our suppliers will be able to meet our demand for
components in a timely and cost-effective manner. For example, due to strong
worldwide demand, the electronics industry is facing shortages on electronic
components such as various memory devices and passive components. Due to these
shortages, our ability to procure these components and meet our on-time delivery
requirements in a cost-effective manner could be impacted. Our operating
results, financial condition, or customer relationships could be adversely
affected by these shortages. These adverse effects could result from an
inability to fulfill customer demand or increased costs to acquire key
components or services.

Increasingly, we have been sourcing a greater number of components from a select
number of vendors to obtain better pricing through higher volumes. Also, there
has recently been a trend toward consolidation of vendors of electronic
components. This greater reliance on a smaller number of suppliers increases our
risk of experiencing unfavorable price fluctuations or a disruption in supply,
particularly in a supply constrained environment.


                                       24
<PAGE>


Optimal performance of the supply chain requires accurate forecasting of demand,
which may be more challenging in the case of emerging technologies and products.
If demand for such products and growth of these markets are significantly
different from our forecasting and planning, we may face inadequate component
supply due to shortages or order lead-time requirements. This would adversely
affect our revenues and financial results.

The cost, quality, and availability of third party manufacturing operations are
essential to the successful production and sale of many of our products. The
inability of any third party manufacturer to meet our cost, quality, and
availability standards could adversely impact our financial condition or results
of operations. In addition we have entered into outsourcing arrangements for
manufacturing services. For example, on September 30, 2000 we sold our Mt.
Prospect, Illinois manufacturing and distribution operation to Manufacturers'
Services Ltd. (MSL). MSL will manufacture broadband access, LAN telephony and
carrier networks products for us. The sale, transfer, or consolidation of
manufacturing facilities, if not properly executed, could lead to supply
disruptions, an inability to satisfy demand, higher costs, or quality issues
across our various businesses which could be costly to remedy. Any of these
scenarios could have a significant negative impact on our financial results.

Improvements in our supply chain management have enabled us to reduce our
channel inventory model by two weeks on average. We have been operating within
our existing channel inventory model of between five to seven weeks of supply on
hand for the past two fiscal years. If we are unable to sustain the improvements
we have made in our supply chain capabilities or encounter external supply chain
disruptions, we may experience product stock-outs or shortages, which could
adversely impact our financial results.

COMPETITION FOR KEY PERSONNEL; RETENTION AND RECRUITING

Our success depends to a significant extent upon retention and recruitment of a
number of key employees and management. Changes associated with realignment of
our business operations and strategy may impact retention of existing employees.
Over the past year, we have experienced an increased rate of employee turnover
compared to historical levels. The loss of the services of key employees and
management could adversely affect our product introduction schedules, customer
relationships, operating results, or financial condition.

The ability to recruit employees, both to replace attrition and to grow our
emerging businesses, may be a significant challenge due to the increasingly
competitive marketplace for needed skills. Recruiting and retaining skilled
personnel, including engineers, continues to be highly competitive. There has
been a dramatic increase of technology start-up companies recruiting for the
same talent that we require. If we cannot successfully recruit and retain
skilled personnel, our ability to compete may be adversely affected. In
addition, we must carefully balance the growth in our employee base commensurate
with our anticipated sales growth. If our sales growth or attrition levels vary
significantly, our results of operations or financial condition could be
adversely affected.

RELIANCE ON DISTRIBUTORS, RESELLERS, PC OEMS AND SERVICE PROVIDERS

We distribute many of our products through two-tiered distribution channels that
include distributors, systems integrators, value-added resellers, and retailers.
We also sell to PC OEMs, large enterprises and service providers. Under our new
strategic focus, we will increase our commitment to and become increasingly
reliant upon our two-tiered distribution model as well as sales to OEMs. We will
also be developing our Carrier channel through expanded partnerships with
Internet and other competitive service providers. Our future results and
financial condition are partially dependent on a number of factors relating to
this distribution model, including the impact of our business realignment,
issues associated with competition among and within our channels, selling to PC
OEMs, and channel inventory and customer concentration.


                                       25
<PAGE>



BUSINESS  REALIGNMENT.  The activities  surrounding our business realignment may
adversely  impact our ongoing  relationships  with our channel  partners and the
perception of us among end customers:

          -         We have exited our analog-only modem and high-end LAN and
                    WAN chassis product lines. In the past, through our channel
                    partners, we have been able to present end-to-end networking
                    solutions and complementary products to end customers, whom
                    we believe synergistically generated sales. As a result of
                    the business realignment, there may be a negative effect on
                    sales of ongoing  products, since these products may not be
                    perceived to be part of a larger integrated or complementary
                    solution.

          -         As part of our business realignment, we reduced our direct,
                    large account sales resources, which were primarily
                    dedicated to promoting the now-discontinued high-end LAN and
                    WAN chassis products. We will still be targeting such
                    customers for our continuing high-volume products. However,
                    the reduction in our large account sales force may result in
                    our sales being adversely impacted.

          -         Customers and channel partners may attempt to return
                    products they have already purchased or cancel orders
                    recently placed. Due to our business realignment, we have
                    recently experienced a higher level of such returns and
                    cancellations. We do not anticipate significant returns or
                    order cancellations beyond the second quarter of fiscal
                    2001.

Therefore, we may have declining levels of business through our traditional
distribution channels as a result of impaired relationships with partners and
end customers. There can be no guarantee that we can re-establish such
relationships or forge new channel and end customer relationships in a timely
manner to overcome any loss of business to existing customers or channel
disruptions for sell-through of our new products.

INVENTORY LEVELS IN CHANNEL. Our distributors and resellers maintain inventories
of our products. As part of our efforts to optimize our supply chain, we have
reduced the number of our distributors through whom we sell our products as well
as the levels of inventory held by those distributors. We work closely with our
distributors and resellers to monitor inventory levels and ensure that
appropriate levels of products are available to end-users. Notwithstanding such
efforts, if channel partners attempt to reduce their levels of inventory or if
they do not maintain sufficient levels to meet customer demand, our sales could
be negatively impacted.

RELIANCE ON A SMALL NUMBER OF DISTRIBUTORS. Significant portions of our sales
are made to a few customers. For the first quarter of fiscal year 2001, Ingram
Micro represented approximately 17 percent of our total sales and Tech Data
represented approximately 12 percent of our total sales. Ingram Micro and Tech
Data are both distributors primarily of our commercial and consumer networking
products. We cannot be certain that these customers will continue to purchase
our products at current levels. Additionally, consolidation among distributors
is reducing the number of distributors in the North American market. Because our
sales are becoming more concentrated among a smaller number of customers, our
results of operations, financial condition, or market share could be adversely
affected if our customers:

          -         stop purchasing our products or focus more on selling our
                    competitors' products;

          -         reduce, delay, or cancel their orders;

          -         become unable to sell our products because we do not ship
                    the products to them in a timely manner; or

          -         experience competitive, operational, or financial
                    difficulties, impairing our ability to collect payments from
                    them.


                                       26
<PAGE>


PC OEMs. PC-related networking products such as NICs and PC Cards are
increasingly being sold through the PC OEM channel rather than the
distribution channel. We derive a significant portion of our personal
connectivity product sales from PC OEMs such as Dell Computer, Toshiba,
Gateway, Hewlett-Packard, and IBM, manufacturers that incorporate our NICs,
PC Cards, or chipsets into their products. While sales to PC OEMs are
important, products sold through the PC OEM channel typically have lower
average selling prices than those sold through other channels. Therefore, our
sales and margins may be adversely impacted if sales to PC OEMs continue to
become a larger percentage of our business.

E-BUSINESS/WEB-ENABLEMENT INITIATIVE

A key initiative for us is to drive broad web-enablement of sales, supply chain,
and internal processes. We are building in-house capabilities to sell directly
to end-user customers (B2C) and distribution partners (B2B) over the Internet
(e-Business). This e-Business initiative could cause conflict with our current
indirect channels of distribution. If we are unsuccessful in selling through our
e-Business channel, we could also lose market share to competitors who have more
successfully developed these capabilities. These changes in the pattern of
distribution of networking products could have a material adverse effect on our
sales and financial results.

We have also invested substantial time and resources into deploying the web as
the primary medium and platform for internal applications and processes across
3Com. This involves redesigning some of our core business processes, including
forecasting, supply chain operations, and order fulfillment. Implementing this
initiative will require enhanced information systems, substantial training, and
disciplined execution. We believe that the successful web-enablement of 3Com is
critical to our long-term competitive position. There can be no assurances,
however, that this initiative will be implemented successfully or that
disruptions in operations will not occur in the process.

CHANGES IN OUR INDUSTRY; ROLE OF ACQUISITIONS

The networking business is highly competitive, and as such, our growth is
dependent upon market growth and our ability to enhance existing products and
introduce new products on a timely basis. Our new strategic focus on emerging
and high-growth product lines mandates that we act quickly and effectively to
enter into new markets. One of the ways we will address this need is through
acquisitions of and minority equity investments in companies with promising
technology and products and/or proven market access and position. For
example, the acquisition of Call Technologies enhances the service
capabilities for our CommWorks-Registered Trademark- architecture and our
Total Control-Registered Trademark- multi-service access platform. In
addition, our acquisition of Kerbango will allow us to offer consumers a rich
Internet experience by providing a complete Internet audio solution for the
home and office.

Acquisitions involve numerous risks, including the following:

          -         difficulties in integration of the operations, technologies,
                    and products of the acquired companies;
          -         the risk of  diverting  management's  attention  from normal
                    daily operations of the business;
          -         potential  difficulties  in completing  projects  associated
                    with purchased in-process research and development;
          -         risks of entering markets in which we have no or limited
                    direct prior experience and where competitors in such
                    markets have stronger market positions;
          -         the potential loss of key employees of the acquired company;
                    and
          -         an uncertain sales and earnings stream from the acquired
                    entity, which may result in unexpected dilution to our
                    earnings.

Mergers and acquisitions of high-technology companies are inherently risky, and
no assurance can be given that our previous or future acquisitions will be
successful and will not have a material adverse affect on our business,
operating results, or financial condition. We must also focus on our ability to
manage and integrate any such acquisition. Failure to manage growth effectively
and successfully integrate acquired companies could adversely affect our
business and operating results.


                                       27
<PAGE>


In general, there have been many mergers and acquisitions in the networking
industry in the past several years. There have been mergers between
telecommunications equipment providers and networking companies, as well as
between networking companies and computer component suppliers. In the last 12
months, we completed four acquisitions and our competitors, including Lucent
Technologies, Cisco Systems, Nortel Networks, Alcatel, Siemens, and Intel have
also engaged in numerous transactions. Future changes in the networking industry
may result in more companies with greater resources and stronger competitive
positions and products than us. Furthermore, companies may be created that are
able to respond more rapidly to market opportunities. Continued changes in our
industry may adversely affect our operating results or financial condition.

MANAGEMENT OF STRATEGIC RELATIONSHIPS AND INVESTMENTS

In addition to mergers and acquisitions, technology companies are continually
entering into strategic relationships. For example, over the past 12 months, we
announced or expanded strategic relationships with numerous companies including
the following:

          -         AT&T
          -         Accton Technology
          -         Apropos Technology
          -         Bell Atlantic
          -         Broadcom
          -         CAIS Internet
          -         Copper Mountain Networks
          -         Dell Computer
          -         Extreme Networks
          -         F5 Networks
          -         Gateway
          -         Hewlett-Packard
          -         Hitachi
          -         IBM
          -         Inktomi
          -         marchFIRST (formerly USWeb/CKS)
          -         Microsoft
          -         NatSteel Electronics
          -         Samsung Electronics
          -         SonicWALL
          -         Symbol Technologies

If successful, these relationships will be mutually beneficial and result in
industry and market growth. However, these alliances carry an element of risk
since, in most cases, we must compete in some business areas with companies with
which we have strategic alliances and, at the same time, cooperate with such
companies in other business areas. If these companies fail to perform, or if
these relationships fail to materialize as expected, we could suffer delays in
product or market development or other operational difficulties. Furthermore,
our results of operations or financial condition could be adversely impacted if
we experience difficulties managing relationships with our partners or if
projects with partners are unsuccessful. In addition, if our competitors enter
into successful strategic relationships, they could increase the competition
that we face.


                                       28
<PAGE>


In support of our business operations and overall strategy, we have made direct
and indirect strategic investments in other technology companies and component
suppliers. These investments may drive industry and market growth, strengthen
supplier relationships, enhance our internal research and development efforts,
accelerate the time to market of our new products, and complement our
acquisition strategy. Some of these investments have significantly appreciated
in value. If there is a substantial decline in the value of these investments,
our financial condition could be adversely impacted.

Our acquisition of technology, products, or market access through equity
investments is usually coupled with a strategic commercial relationship. Our
investments tend to be in very early stage technology companies with unproven
technology and products. There can be no assurances that we can successfully
form appropriate commercial relationships to gain and integrate such products or
technology into our technology or product lines or that such companies will not
be subsequently acquired by third parties, including competitors of ours.

TRANSFER OF ANALOG-ONLY MODEM PRODUCT LINE

On September 2, 2000 we completed the transfer of our analog-only modem product
lines to U.S. Robotics Corporation ("New USR"), the new joint venture company
formed with our partners Accton Technology and NatSteel Electronics. 3Com holds
a minority equity position in New USR. Although we have transferred our
analog-only modem business to New USR, we will continue to have sales related to
the manufacture of certain analog-only modem products for New USR in the second
quarter of fiscal 2001.

In addition, we entered into transitional service agreements with New USR in the
areas of information technology systems, supply chain management, buildings and
services, and certain treasury/finance functions. We began such services prior
to the transfer and will continue such services for a period of up to one year
afterwards. If we do not satisfactorily perform our obligations under these
agreements we may be held liable for any resulting losses.

PALM SEPARATION

On July 27, 2000 3Com completed the spin-off of Palm, Inc. ("Palm"), our
handheld computer business, by distributing our remaining ownership of
outstanding Palm common stock to 3Com shareholders. As part of the separation,
we entered into certain transitional service agreements with Palm to support
ongoing Palm operations relating to information technology systems, supply chain
management, human resources administration, product order administration,
customer service, buildings and facilities, treasury management, and legal,
finance, and accounting. These transitional service agreements generally have
terms of less than two years following the separation. If we do not
satisfactorily perform our obligations under these agreements, we may be held
liable for any resulting losses allegedly suffered by Palm.

To enable our distribution of Palm common stock to our shareholders, we received
a ruling from the Internal Revenue Service that the distribution will be not be
taxable. Such ruling requires 3Com and Palm, for up to two years following the
distribution date, not to engage in certain business combinations that would
constitute a change of more than 50 percent of the equity interest in either
company. If either 3Com or Palm fail to conform to requirements set forth in the
ruling, there would be material adverse consequences, potentially including
making the distribution taxable.

Finally, at the time of the distribution of Palm shares to our shareholders, an
adjustment was made to stock options held by our employees to preserve the
intrinsic value of these options and the ratio of the exercise price to the
market price. As of July 27, 2000 there were approximately 35 million employee
options outstanding. Immediately after the Palm distribution, there were
approximately 169 million employee options outstanding, of which approximately
60 million were vested and immediately exercisable. The exercise of stock
options by employees may potentially result in a dilution in the ownership
interest of our current shareholders.


                                       29
<PAGE>


COMPETITION AND PRICING PRESSURE

We participate in a highly volatile industry characterized by vigorous
competition for market share as well as rapid product and technology development
and maturation. Our competition comes from both small to medium sized companies
and start-up companies that have a narrow product or technology focus, and from
well-capitalized computer systems, data communications and telecommunications
companies that compete across a broad spectrum of networking technologies. The
larger, well-established competitors include Intel, Lucent, Nortel, Cisco,
Alcatel, Siemens, and Hewlett-Packard. Some of the smaller or more narrowly
focused competitors in our industry, along with new start-ups include Alteon,
Com21, Clarent, Efficient Networks, NETGEAR, Redback Networks, Juniper Networks,
Sonus Networks, Terayon, VocalTec, and Xircom.

Our industry continues to undergo rapid change resulting in new competitors who
may have greater financial, marketing, and technical resources than we do or who
may have a greater competitive edge due to technology innovation. For example,
technology innovations are driving the convergence of voice, video, and data
traffic onto a single network infrastructure, resulting in new entrants to the
market with whom we may compete.

In addition, both we and our competitors sometimes lower product prices in order
to gain market share or create more demand. For example, in the first quarter of
fiscal 2001 we experienced pricing pressure in the market for our broadband
modem products, and continue to experience price competition in the markets for
our workgroup systems products, as well as for our more mature carrier products
which tend to have a higher degree of price sensitivity. Intense pricing
competition in our industry may adversely affect our business, operating
results, or financial condition.

We are also selling products into new markets where we are new entrants to the
market ourselves and may compete with different companies than in the past. This
is especially true in our high-growth emerging markets such as the wireless, IP
telephony, home networking and broadband markets. Our principal competitors in
these emerging markets include both traditional competitors such as Intel,
Xircom, Cisco, Lucent and Alcatel, as well as new competitors such as Alteon,
Com21, Clarent, Efficient Networks, Motorola, NETGEAR, Redback Networks, Juniper
Networks, Sonus Networks, Terayon, Toshiba, and VocalTec.

These competitors may be able to respond more rapidly than us to new or
emerging technologies, changing market dynamics or changes in customer
requirements. In addition, we expect intense price competition in these new
markets since manufacturers may set low product prices to increase technology
and product acceptance and adoption. We expect that these products,
especially in the consumer and retail-oriented product lines such as home
networking and internet appliances, will be very price sensitive and
therefore our sales of these products and gross margins on these products may
be adversely affected by competitive pressures. Our failure to compete
successfully against current or future competitors could harm our business,
operating results, or financial condition.

Semiconductor manufacturers, such as Intel, are increasingly integrating more
NIC and modem functionality onto a single chip on the motherboard. This trend
may offer PC OEMs and other networking customers less costly alternatives to our
solutions. If integration of networking and computer processing functionality on
a reduced number of components increases, our future sales growth and
profitability could be adversely affected. Furthermore, some of these
semiconductor manufacturers may be our current suppliers of components;
therefore, we may be competing directly with our vendors in certain future
situations.


                                       30
<PAGE>


UNCERTAINTIES OF INTERNATIONAL MARKETS

We operate internationally and expect that international markets will
continue to account for a significant percentage of our sales. Some
international markets are characterized by economic and political instability
and currency fluctuations that can adversely affect our operating results or
financial condition. The level of international sales in different regions
will be positively or negatively impacted by unforeseen conditions and
events. For example, high oil prices and increased transportation costs may
adversely impact shipments to certain markets and the admission of China to
the World Trade Organization and granting of Permanent Normalized Trade
Relations status may stimulate sales to China. Should international regions
experience economic or political instability, our results of operations may
be adversely affected.

INDUSTRY STANDARDS AND REGULATIONS

Our success also depends on:

          -         the timely adoption and market acceptance of industry
                    standards;
          -         resolution of conflicting U.S. and international standards
                    requirements created by the convergence of technology such
                    as voice onto data networks;
          -         the timely introduction of new standards-compliant products;
                    and
          -         a favorable regulatory environment.

Slow market acceptance of new technologies and industry standards could
adversely affect our results of operations or financial condition. In addition,
if we fail to achieve timely certification of compliance to industry standards
for our products, our sales of such products could be adversely affected. There
are a number of new product initiatives, particularly in the area of wireless
access, IP telephony, and broadband access that could be impacted by new or
revised regulations, which in turn could adversely affect our results of
operations or financial condition. For example, development of a new global
"third generation" standard for wireless Internet access is underway and
expected to be based on CDMA. However, several technologies including Global
System for Mobile Communication (GSM), Personal Digital Cellular (PDC), and Time
Division Multiple Access (TDMA) are competing for the standard, which will
ultimately be determined by the International Telecommunications Union (ITU).

CUSTOMER ORDER FULFILLMENT

The timing and amount of our sales depend on a number of factors that make
estimating operating results prior to the end of any period uncertain. For
example, we do not typically maintain a significant backlog and sales are
dependent on our ability to appropriately forecast product demand. In addition,
our customers historically request fulfillment of orders in a short period of
time, resulting in limited visibility to sales trends. Consequently, our
operating results depend on the volume and timing of orders and our ability to
fulfill orders in a timely manner. Historically, sales in the third month of the
quarter have been higher than sales in each of the first two months of the
quarter. Recently this pattern has become more pronounced, which may increase
the risk of unforeseen events negatively impacting our financial results.
Non-linear sales patterns make business planning difficult, and increase the
risk that our quarterly results will fluctuate due to disruptions in functions
such as manufacturing, order management, information systems, and shipping.

WARRANTIES AND INTERNATIONAL REQUIREMENTS

Because our products are often covered by warranties, we may be subject to
contractual and/or legal commitments to perform under such warranties. If our
products fail to perform as warranted and we do not resolve product quality
or performance issues in a timely manner, our operating results or financial
condition could be adversely affected. Likewise, we could be subject to
claims for business disruption or consequential damages if a network
implementation is not completed successfully or in a timely manner.

                                       31
<PAGE>

Our products are sold and marketed in many countries, and as such, our products
must function in and meet the requirements of many different telecommunications
environments and be compatible with various telecommunications systems and
products. If our products fail to meet the requirements of international
telecommunication environments, our sales could be negatively impacted.

Our business realignment actions include transition of certain business lines to
third parties, such as analog-only modems, or obsolescence of certain product
lines such as high-end LAN and WAN chassis products. To the extent that third
parties do not assume or fulfill our warranty obligations, we will remain
obligated to provide warranty support, including repair services and spare parts
for the duration of contracts or statutory legal requirements. Any failure to
perform such commitments could subject us to claims, which may have a material
adverse impact on our business and financial results.

COMMERCIAL COMMITMENTS

We enter into minimum quantity or other non-cancelable commitments as needed.
For example, we have committed to minimum purchases of product components from a
vendor through the end of calendar year 2002. These types of agreements subject
us to risk depending on future events. If, for example, sales volumes of certain
products fluctuate significantly, we may be unable to meet our commitments. This
may result in us incurring liabilities that adversely affect our financial
results.

INTELLECTUAL PROPERTY RIGHTS

Many of our competitors, such as telecommunications and computer equipment
manufacturers, have large intellectual property portfolios, including patents
that may cover technologies that are relevant to our business. In addition, many
smaller companies, universities, and individual inventors have obtained or
applied for patents in areas of technology that may relate to our business. The
industry is moving towards aggressive assertion, licensing, and litigation of
patents and other intellectual property rights.

In the course of our business, we frequently receive claims of infringement or
otherwise become aware of potentially relevant patents or other intellectual
property rights held by other parties. We evaluate the validity and
applicability of these intellectual property rights, and determine in each case
whether we must negotiate licenses or cross-licenses to incorporate or use the
proprietary technologies, protocols, or specifications in our products. If we
are unable to obtain and maintain licenses on favorable terms for intellectual
property rights required for the manufacture, sale, and use of our products,
particularly those which must comply with industry standard protocols and
specifications to be commercially viable, our business, results of operations,
or financial condition could be adversely impacted.

In addition to disputes relating to the validity or alleged infringement of
other parties' rights, we may become involved in disputes relating to our
assertion of our intellectual property rights. Whether we are defending the
assertion of intellectual property rights against us or asserting our
intellectual property rights against others, intellectual property litigation
can be complex, costly, protracted, and highly disruptive to business operations
by diverting the attention and energies of management and key technical
personnel. Further, plaintiffs in intellectual property cases often seek
injunctive relief and the measures of damages in intellectual property
litigation are complex and often subjective or uncertain. Thus, the existence of
or any adverse determinations in this litigation could subject us to significant
liabilities and costs. In addition, if we are the alleged infringer, we could be
required to seek licenses from others or be prevented from manufacturing or
selling our products, which could cause disruptions to our operations or the
markets in which we compete. If we are asserting our intellectual property
rights, we could be prevented from stopping others from manufacturing or selling
competitive products. Any one of these factors could adversely affect our
results of operations or financial condition.


                                       32
<PAGE>

FLUCTUATIONS IN QUARTERLY RESULTS; VOLATILITY OF STOCK PRICE

Our quarterly operating results are difficult to predict and may fluctuate
significantly. In addition to factors discussed above, a wide variety of factors
can cause these fluctuations, including:

          -         component shortages;
          -         seasonality;
          -         the introduction and acceptance of new products and
                    technologies;
          -         price competition;
          -         general conditions and trends in the networking industry and
                    technology sector;
          -         internal reorganizations or realignments;
          -         disruption in international markets;
          -         general economic conditions;
          -         industry consolidations and acquisitions;
          -         disruption in the distribution channel;
          -         timing of orders received within the quarter; and
          -         non-linear sales within the quarter.

In recent years, we have experienced fluctuations in our quarterly results due
to some of the factors listed above. These factors, and accompanying
fluctuations in periodic operating results, could have a significant adverse
impact on the market price of our common stock.

Additionally, we anticipate that the activities surrounding our business
realignment and the transition to our new strategic focus will contribute
significantly to fluctuations in our quarterly operating results for the next
several quarters.

Our stock price has historically experienced substantial price volatility and we
expect that this will continue, particularly due to fluctuations in quarterly
operating results as outlined above, variations between our actual or
anticipated financial results and the published analysts' expectations, and as a
result of announcements by our competitors. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many technology companies. These market price fluctuations have often
been unrelated to the operating performance of these companies. These factors,
as well as general economic and political conditions, may materially adversely
affect the market price of our stock in the future.

PROPOSED CHANGES IN ACCOUNTING FOR BUSINESS COMBINATIONS AND INTANGIBLE ASSETS

The Financial Accounting Standards Board ("FASB") began deliberation of
revisions to the rules for business combinations and intangible assets in 1996.
Some of these deliberations have included accounting rule-making bodies from
other nations as the financial communities attempt to develop global consistency
where possible. Business combination rules govern the accounting for mergers and
acquisitions used in either a purchase or a pooling-of-interests combination.
Business combinations may generate intangible assets (including goodwill) which
represent the excess purchase price of an acquired enterprise over net
identifiable assets.

Tentative conclusions of the FASB will prohibit the use of pooling-of-interests
and will establish new accounting standards and financial presentation for
intangible assets resulting from business combinations. The FASB expects to
issue a final standard by the end of calendar year 2000. The final standard is
not expected to address accounting for in-process research and development
costs. Changes to the current accounting rules for business combinations and
intangible assets will not preclude mergers or acquisitions but may increase the
earnings dilution associated with future transactions. In addition, if
pooling-of-interests accounting is no longer available, we may use cash more
often than our common stock to pay for acquisitions of other companies.


                                       33
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

3Com holds a substantial portfolio of marketable-equity traded securities that
have a short trading history and are highly subject to market price volatility.
Equity security price fluctuations of plus or minus 15 percent would have a
$112.9 million impact on the value of these securities as of the end of the
first quarter of fiscal 2001. Equity security price fluctuations of plus or
minus 50 percent would have a $376.4 million impact on the value of these
securities as of the end of the first quarter of fiscal 2001.

For interest rate sensitivity and foreign currency exchange risk, reference is
made to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market
Risk, in our Annual Report on Form 10-K for the year ended June 2, 2000.


PART II.      OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          We are a party to lawsuits in the normal course of our business.
          Litigation in general, and intellectual property and securities
          litigation in particular, can be expensive and disruptive to normal
          business operations. Moreover, the results of complex legal
          proceedings are difficult to predict. We believe that we have defenses
          in each of the cases set forth below and are vigorously contesting
          each of these matters. An unfavorable resolution of one or more of the
          following lawsuits could adversely affect our business, results of
          operations, or financial condition.

          SECURITIES LITIGATION

          On March 24 and May 5, 1997, securities class action lawsuits,
          captioned HIRSCH V. 3COM CORPORATION, ET AL., Civil Action No.
          CV764977 (HIRSCH), and KRAVITZ V. 3COM CORPORATION, ET AL., Civil
          Action No. CV765962 (KRAVITZ), respectively, were filed against
          3Com and certain of its officers and directors in the California
          Superior Court, Santa Clara County. The complaints allege
          violations of Sections 25400 and 25500 of the California
          Corporations Code and seek unspecified damages on behalf of a class
          of purchasers of 3Com common stock during the period from September
          24, 1996 through February 10, 1997. In late 1999, these cases were
          stayed by the Court, pending resolution of proceedings in the
          EUREDJIAN V. 3COM CORPORATION matter, discussed below. Because the
          EUREDJIAN case has been dismissed, the HIRSCH AND KRAVITZ cases are
          no longer stayed. They are in discovery. No trial date has been
          scheduled.

          On February 10, 1998, a securities class action, captioned EUREDJIAN
          V. 3COM CORPORATION, ET AL., Civil Action No. C-98-00508CRB
          (EUREDJIAN), was filed against 3Com and several of its present and
          former officers and directors in United States District Court for the
          Northern District of California asserting the same class period and
          factual allegations as the HIRSCH AND KRAVITZ actions. The complaint
          alleges violations of the federal securities laws, specifically
          Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and
          seeks unspecified damages. In May 2000, at the request of plaintiffs,
          the Court dismissed the EUREDJIAN case with prejudice.

          In December 1997, a securities class action, captioned REIVER V. 3COM
          CORPORATION, ET AL., Civil Action No. C-97-21083JW (REIVER), was filed
          in the United States District Court for the Northern District of
          California. Several similar actions have been consolidated into this
          action, including FlORIDA STATE BOARD OF ADMINISTRATION AND TEACHERS
          RETIREMENT SYSTEM OF LOUISIANA V. 3COM CORPORATION, ET AL., Civil
          Action No. C-98-1355. On August 17, 1998, the plaintiffs filed a
          consolidated amended complaint which alleges violations of the federal
          securities laws, specifically Sections 10(b) and 20(a) of the
          Securities and Exchange Act of 1934, and which seeks unspecified
          damages on behalf of a purported class of purchasers of 3Com common
          stock during the period from April 23, 1997 through November 5, 1997.
          3Com has answered an amended complaint and the case is now in
          discovery. No trial date has been scheduled.


                                       34
<PAGE>


          In October 1998, a securities class action lawsuit, captioned ADLER V.
          3COM CORPORATION, ET AL., Civil Action No. CV777368 (ADLER), was filed
          against 3Com and certain of its officers and directors in the
          California Superior Court, Santa Clara County, asserting the same
          class period and factual allegations as the REIVER action. The
          complaint alleges violations of Sections 25400 and 25500 of the
          California Corporations Code and seeks unspecified damages. By
          agreement of the parties, this case will be stayed to allow the REIVER
          case to proceed.

          On May 11, 1999, a securities class action, captioned GAYLINN V. 3COM
          CORPORATION, ET AL., Civil Action No. C-99-2185 MMC (GAYLINN), was
          filed against 3Com and several of its present and former officers and
          directors in United States District Court for the Northern District of
          California. Several similar actions have been consolidated into the
          GAYLINN action. On September 10, 1999, the plaintiffs filed a
          consolidated complaint which alleges violations of the federal
          securities laws, specifically Sections 10(b) and 20(a) of the
          Securities Exchange Act of 1934, and seeks unspecified damages on
          behalf of a purported class of purchasers of 3Com common stock during
          the period from September 22, 1998 through March 2, 1999. In January
          2000, the Court dismissed the complaint. In February 2000, plaintiffs
          filed an amended complaint. In June 2000, the Court dismissed the
          amended complaint without prejudice. Plaintiffs filed another amended
          complaint. On July 24, 2000, the Company filed a motion to dismiss the
          latest amended complaint. In September 2000, the Court dismissed the
          amended complaint with prejudice.

          INTELLECTUAL  PROPERTY

          On April 28, 1997, Xerox Corporation filed suit against U.S.
          Robotics Corporation and U.S. Robotics Access Corp. in the United
          States District Court for the Western District of New York. The
          case is now captioned XEROX CORPORATION V. U.S. ROBOTICS
          CORPORATION, U.S. ROBOTICS ACCESS CORP., PALM COMPUTING, INC. AND
          3COM CORPORATION (Civil Action Number 97-CV-6182T). The Complaint
          alleged willful infringement of United States Patent Number
          5,596,656, entitled "Unistrokes for Computerized Interpretation of
          Handwriting." The Complaint sought to permanently enjoin the
          defendants from infringing the patent in the future. In an Order
          entered by the Court on June 6, 2000, the Court granted the
          defendants' motion for summary judgment of non-infringement, and
          the case was dismissed in its  entirety.  Xerox has appealed the
          dismissal to the U.S. Court of Appeals for the Federal Circuit.

          On May 26, 2000 3Com Corporation filed a patent infringement lawsuit
          against Xircom, Inc. The lawsuit, filed in the United States District
          Court for the District of Utah (2:00CV-0436G), alleges infringement of
          3Com's patent numbers 6,012,953, 5,532,898 and 5,777,836. On September
          21, 2000 in the United States District Court for the Central District
          of California (00-10198 WJR), Xircom Corporation filed suit against
          3Com Corporation alleging infringement of Xircom's U.S. Patent Numbers
          5,773,332, 5,940,275, 6,115,257 and 6,095,851. 3Com is currently
          investigating the lawsuit filed by Xircom.



ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

ITEM 5.   OTHER INFORMATION

          None.

                                       35


<PAGE>



Item 6.       EXHIBITS AND REPORTS ON FORM 8-K

              (a) Exhibits


                    2.1       Master Separation and Distribution Agreement
                              between the registrant and Palm, Inc. effective as
                              of December 13, 1999, as amended (15)
                    2.2       General Assignment and Assumption Agreement
                              between the registrant and Palm, Inc., as amended
                              (15)
                    2.3       Master Technology Ownership and License Agreement
                              between the registrant and Palm, Inc. (15)
                    2.4       Master Patent Ownership and License Agreement
                              between the registrant and Palm, Inc. (15)
                    2.5       Master Trademark Ownership and License Agreement
                              between the registrant and Palm, Inc. (15)
                    2.6       Employee Matters Agreement between the registrant
                              and Palm, Inc. (15)
                    2.7       Tax Sharing Agreement between the registrant and
                              Palm, Inc. (15)
                    2.8       Master Transitional Services Agreement between the
                              registrant and Palm, Inc. (15)
                    2.9       Real Estate Matters Agreement between the
                              registrant and Palm, Inc. (15)
                    2.10      Master Confidential Disclosure Agreement between
                              the registrant and Palm, Inc. (15)
                    2.11      Indemnification and Insurance Matters Agreement
                              between the registrant and Palm, Inc. (15)
                    3.1       Certificate of Incorporation (11)
                    3.2       Certificate of Correction Filed to Correct a
                              Certain Error in the Certificate of Incorporation
                              (11)
                    3.3       Certificate of Merger (11)
                    3.4       Corrected Certificate of Merger (14)
                    3.5       Bylaws of 3Com Corporation, As Amended (12)
                    4.1       Amended and Restated Rights Agreement dated
                              December 31, 1994 (Exhibit 10.27 to Form 10-Q) (4)
                    4.2       Amended and Restated Senior Notes Agreement
                              between U.S. Robotics Corporation, Metropolitan
                              Life Insurance  Company, The Northwestern Mutual
                              Life Insurance Company, and Metropolitan Property
                              and Casualty Insurance Company (5)
                    4.3       Amendment to amended and restated note agreements
                              between 3Com Corporation, Metropolitan Life
                              Insurance Company, The Northwestern Mutual Life
                              Insurance Company, and Metropolitan Property and
                              Casualty Insurance Company (13)
                    4.4       Second amendment to amended and restated note
                              agreements between 3Com Corporation, Metropolitan
                              Life Insurance Company, The Northwestern Mutual
                              Life Insurance Company, and Metropolitan Property
                              and Casualty Insurance Company (14)
                    10.1      1983 Stock Option Plan, as amended (14)*
                    10.2      Amended and Restated  Incentive  Stock Option Plan
                              (2)*
                    10.3      License Agreement dated March 19, 1981 (1)
                    10.4      Second Amended and Restated 1984 Employee Stock
                              Purchase Plan (Exhibit 10.5 to Form 10-Q) (6)*
                    10.5      3Com Corporation Director Stock Option Plan, as
                              amended (Exhibit 19.3 to Form 10-Q) (3)*
                    10.6      Amended 3Com Corporation Director Stock Option
                              Plan (Exhibit 10.8 to Form 10-Q) (6)*
                    10.7      3Com Corporation Restricted Stock Plan, as amended
                              (Exhibit 10.17 to Form 10-Q) (6)*


                                       36
<PAGE>


                    10.8      1994 Stock Option Plan, as amended (14)*
                    10.9      Lease Agreement between BNP Leasing Corporation,
                              as Landlord, and 3Com Corporation, as Tenant,
                              effective as of November 20, 1996 (Exhibit 10.37
                              to Form 10-Q) (8)
                    10.10     Purchase Agreement between BNP Leasing
                              Corporation, and 3Com Corporation, effective as of
                              November 20, 1996 (Exhibit 10.38 to Form 10-Q) (8)
                    10.11     Agreement and Plan of Reorganization among 3Com
                              Corporation, OnStream Acquisition Corporation and
                              OnStream Networks, Inc. dated as of October 5,
                              1996 (Exhibit 2.1 to Form S-4) (7)
                    10.12     Lease Agreement between BNP Leasing Corporation,
                              as Landlord, and 3Com Corporation, as Tenant,
                              effective as of February 3, 1997 for the Combined
                              Great America Headquarters site (Exhibit 10.19 to
                              Form 10-Q) (10)
                    10.13     Purchase Agreement between BNP Leasing
                              Corporation, and 3Com Corporation, effective as of
                              February 3, 1997 for the Combined Great America
                              Headquarters site (Exhibit 10.20 to Form 10-Q)
                              (10)
                    10.14     Credit Agreement dated as of December 20, 1996
                              among 3Com Corporation, Bank of America National
                              Trust and Savings Association, as Agent, and the
                              Other Financial Institutions Party Hereto Arranged
                              by BA Securities, Inc. (Exhibit 10.21 to Form
                              10-Q) (10)
                    10.15     Amended and Restated Agreement and Plan of Merger
                              by and among 3Com Corporation, TR Acquisitions
                              Corporation, 3Com (Delaware) Corporation, and U.S.
                              Robotics Corporation, dated as of February 26,
                              1997 and amended as of March 14, 1997 (9)
                    10.16     Lease Agreement between BNP Leasing Corporation,
                              as Landlord, and 3Com Corporation, as Tenant,
                              effective as of July 25, 1997 for the Great
                              America Phase III (PAL) site (11)
                    10.17     Purchase Agreement between BNP Leasing Corporation
                              and 3Com Corporation, effective as of July 25,
                              1997 for the Great America Phase III (PAL) site
                              (11)
                    10.18     Lease Agreement between BNP Leasing Corporation,
                              as Landlord, and 3Com Corporation, as Tenant,
                              effective as of July 29, 1997 for the Marlborough
                              site (11)
                    10.19     Purchase agreement between BNP Leasing Corporation
                              and 3Com Corporation, effective as of July 29,
                              1997 for the Marlborough site (11)
                    10.20     Lease Agreement between BNP Leasing Corporation,
                              as Landlord, and 3Com Corporation, as Tenant,
                              effective as of August 11, 1997 for the Rolling
                              Meadows site (11)
                    10.21     Purchase Agreement between BNP Leasing
                              Corporation, and 3Com Corporation, effective as of
                              August 11, 1997 for the Rolling Meadows site (11)
                    10.22     First Amendment to Credit Agreement (11)
                    10.23     Form of Management Retention Agreement,  effective
                              as  of  June  2,  1999,   with  attached  list  of
                              parties.* (16)
                    10.24     Form  of  Management  Retention  Agreement,   with
                              attached  list of parties  and  effective  dates.*
                              (16)
                    10.25     Agreement for Purchase and Sale of Land at Highway
                              237 and North First Street, San Jose, California
                              entered into as of May 22, 2000 by and between the
                              registrant and Palm, Inc.
                    27.1      Financial Data Schedule
--------------------------------------------------------------------------------
                    *         Indicates a management contract or compensatory
                              plan.

                    (1)       Incorporated by reference to the corresponding
                              Exhibit previously filed as an Exhibit to
                              Registrant's Registration Statement on Form S-1
                              filed on January 25, 1984 (File No. 2-89045)

                                       37
<PAGE>

                    (2)       Incorporated by reference to Exhibit 10.2 to
                              Registrant's Registration Statement on Form S-4
                              filed on August 31, 1987 (File No. 33-16850)

                    (3)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on January
                              10, 1992 (File No. 0-12867)

                    (4)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on January
                              13, 1995 (File No. 0-12867)

                    (5)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on May 16,
                              1995 (File No. 0-19550)

                    (6)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on January
                              15, 1996 (File No. 0-12867)

                    (7)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Registration Statement on
                              Form S-4 filed on October 11, 1996 (File No.
                              333-13993)

                    (8)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on January
                              13, 1997 (File No. 0-12867)

                    (9)       Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Registration Statement on
                              Form S-4 filed on March 17, 1997 (File No.
                              333-23465)

                    (10)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on April
                              11, 1997 (File No. 0-12867)

                    (11)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on October
                              14, 1997 (File No. 0-12867)

                    (12)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on January
                              11, 1999 (File No. 0-12867)

                    (13)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-K filed on August
                              17, 1999 (File No. 0-12867)

                    (14)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on October
                              8, 1999 (File No. 0-12867)

                    (15)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-Q filed on April
                              4, 2000 (File No. 0-12867)

                    (16)      Incorporated by reference to the Exhibit
                              identified in parentheses previously filed as an
                              Exhibit to Registrant's Form 10-K filed on August
                              17, 2000 (File No. 0-12867)

              (b) Reports on Form 8-K

                    None


                                       38
<PAGE>


                                   SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               3Com Corporation
                                               (Registrant)



Dated:       October 13, 2000          By:    /s/     Michael E. Rescoe
       ----------------------------       -------------------------------------
                                           Michael E. Rescoe
                                           Senior Vice President, Finance and
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Accounting Officer)

                                      39