##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended May 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-12867
 3COM CORPORATION
  Delaware
    
    94-2605794(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)350 Campus DriveMarlborough, Massachusetts
    
    01752(Address of principal executive offices)
    
    (Zip Code)
 (508) 323-1000
 N/A
 :
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.01 par value per share
    
    The NASDAQ Global Select MarketPreferred Stock Purchase Rights
    
    The NASDAQ Global Select Market
 NONE
 þ o
 o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   Class
    
    Outstanding at July 18, 2008Common Stock, $0.01 par value per share
    
    405,288,012 shares
 DOCUMENTS INCORPORATED BY REFERENCE
 Document
    
    Parts Into Which IncorporatedProxy Statement for the Annual
Meeting of Stockholders to be held
September 24, 2008 (Proxy Statement)
    
    Part III, to the extent stated herein




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##### 



3Com Corporation
Form 10-K Annual Report
For the Fiscal Year Ended May 30, 2008
Table of Contents
  
 PagePart IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    25Item 2. Properties
    
    
    25Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    26Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    29Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    47Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    86Item 9A. Controls and Procedures
    
    
    86Item 9B. Other Information
    
    
    89Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    89Item 11. Executive Compensation
    
    
    89Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    89Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    89Item 14. Principal Accounting Fees and Services
    
    
    90Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    90Exhibit Index
    
    
    90Signatures
    
    
    96Financial Statement Schedule
    
    
    97EX-10.2 3COM Corporation 1984 Employee Stock Purhcase PlanEX-10.32 Stand Alone Stock Option Agreement dated May 6, 2008EX-10.33 Stand Alone Restricted Stock Agreement dated May 6, 2008EX-10.54 First Amendment to A&R Credit Agreement dated June 18, 2008EX-21.1 Subsidiaries of RegistrantEX-23.1 Consent of Independent Registered PublicEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEO & CFO
  1




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2




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PART I
 
 ITEM 1. BUSINESS
 GENERAL
  www.3Com.com
 MARKETS AND CUSTOMERS
   
    
    Performance  Enterprise networks have increasing performance requirements with the
expansion of internet protocol, or IP, traffic driven by newer applications such as voice
and video over IP.
    
    Security  The threat environment for todays enterprises is rapidly changing and
requires pervasive network solutions that help control access, quarantine malicious data,
and restore data.
    
    Application delivery  Enterprise customers have evolving needs for increased
application solutions tied to their networks. Customers benefit from best-in-class
solutions for needs such as wide area network, or WAN optimization and voice solutions
integrated directly into their networking solutions.
    
    Cost effectiveness  Enterprise customers value solutions which are affordable to
acquire and operate and offer long-term scalability.
     3




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PRODUCTS AND SERVICES
 H3C SEGMENT PRODUCTS AND SERVICES
  §
    
    Networking  LAN Switches, Routers, and Network Management Software;§
    
    Emerging Technology  IP Storage and IP Video Surveillance;§
    
    Security  Firewalls; and§
    
    Services.
 Networking
  LAN Switches
   §
    
    Core Routing Switches. The S9500 Series 10G Multi-service Core
Routing Switch is a new generation high performance switch. The S9500
series is designed to fully satisfy the requirements of end-users
seeking its high capability, high reliability and multiple services.
It is extensively applied as the core layer of E-government networks,
campus networks, education networks and other enterprise networks and
core layer or aggregation layer of carriers IP Metro Area Networks
(MANs).§
    
    Multi-Service Switches.The S7500 Series high-end multi-service
switch features high performance, high port density and high
flexibility. It can be applied to the core layer of enterprise
networks, campus networks and education MANs, to the convergence layer
of carriers IP MANs, and to the access layer of data centers.§
    
    Layer 3 Gigabit Stackable Switches The 5500 series offers excellent
security, reliability and multi-service support capability, making it
an excellent choice for the convergence layer of large enterprise
networks or campus networks, the core layer of medium- and small-sized
enterprise
 4




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networks, and the edge layer of MANs.§
    
    Layer2 and Layer 3 Intelligent and Resilient Switches. The Layer 2
series offers wire-speed Gigabit Ethernet switching products that
provide high capacity with a full range of features. The Layer 3
series represents the next generation of desktop switches, which can
help customers implement a gigabit Ethernet core network or
aggregation layer with high availability as well as scalability.
 Routers
   §
    
    SR series Routers.The SR family consists of core routers ranging
from products that support a super-large capacity core router, which
can be applied in national backbone networks, provincial backbone
networks and other super-large networks (including those serving at
the backbone network edge and MAN core), to those working at the core
networks of industries and enterprises.§
    
    Intelligent Multi-Service Enterprise Core Routers.The MSR Series
Routers support multiple services, integrating data, voice and video
in one device. MSR adopts an optimized hardware and software
structure to guarantee embedded security and significant performance
while providing the services such as voice over IP or VoIP, business
video and network analysis etc.§
    
    Fixed Port Branch Routers.The AR Series Access Routers are
fixed-port products for small-sized enterprises and branch offices.
They feature enhanced security, superior reliability and advanced QoS
services.
 Network and Access Management System
  Emerging Technology
 IP Storage
  IP Video Surveillance
  5




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Security
 Firewalls
  Services
  DATA AND VOICE BUSINESS UNIT (DVBU) SEGMENT PRODUCTS AND SERVICES
  §
    
    Networking;§
    
    IP Telephony;and§
    
    Services.
 Networking
  §
    
    Ethernet Switching.We offer a full range of fixed-configuration and
modular Ethernet switches that deliver performance and flexibility to
the edge and core IP networks. At the edge, DVBU offerings include
enterprise-class offerings such as the Switch 5500 family, Switch 4500
and Switch 4200 families of products, as well as our OfficeConnect®
and Baseline series targeted at small and medium businesses. At the
core, DVBU offers fully resilient, high-capacity and feature-rich
modular switching products. These include our high-density Switch 8800
and our cost-effective Switch 7750 products.§
    
    Wireless LAN. We offer wireless networking products and solutions that
enable users to stay connected to the network while at their desks or
roaming within an enterprise or a large campus environment. The
productivity increase associated with this ease of information access
in a secure manner is driving many businesses to deploy wireless
networks. We offer a complete portfolio of high-performance,
standards-based wireless solutions, including 802.11 a/b/g wireless
standards, along with wireless security and policy enforcement.§
    
    Routers. We offer routing solutions that bring enterprise-class WAN
routing features, redundancy and performance to the regional offices
of large enterprise customers and to the headquarters of medium-sized
businesses. We also offer router products which provide fixed
configuration solutions to securely connect small offices and remote
offices of large enterprises.
 6




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§
    
    Security.Leveraging the award winning TippingPoint Intrusion
Prevention System (IPS), DVBU has a complete line of unified threat
management (UTM) products that protect enterprises from the myriad of
threats. The X-family of products complements the switching and
wireless solutions to provide a fully secured network solution.§
    
    Network Management. We offer flexible and comprehensive network
management application packages for advanced IT environments. Our
network management applications help our customers manage large and
small wired and wireless networks with tools for network monitoring,
device control and fast problem resolution.
 Internet Protocol (IP) Telephony
  §
    
    IP Telephony Platforms§
    
    Convergence Application Suite§
    
    IP Phones
 Services
   TIPPINGPOINT SECURITY DIVISION (TIPPINGPOINT) SEGMENT PRODUCTS
 Security
   §
    
    Intrusion Prevention Systems;§
    
    Security Services; and§
    
    Network Access Control.
 7




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Intrusion Prevention Systems
    Security Services
 ®
 Network Access Control
  SALES, MARKETING AND DISTRIBUTION
   8




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COMPETITION
    §
    
    Maintain tier-one capability and presence.To maintain tier-one
capability and presence, a provider must have a comprehensive
distribution channel and a strong financial position. In addition,
that provider must have a globally-recognized and preferred brand and
provide strong service and support capabilities.§
    
    Offer innovative products and solutions.To be considered innovative,
a provider must deliver a broad line of products and solutions and
maintain a substantial intellectual property portfolio.
 RESEARCH AND DEVELOPMENT
    SIGNIFICANT CUSTOMERS AND PRODUCTS
  FINANCIAL INFORMATION ABOUT SEGMENT, FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
 SALES
  9




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BACKLOG
  SEASONALITY
  MANUFACTURING AND COMPONENTS
       10




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INTELLECTUAL PROPERTY AND RELATED MATTERS
    EMPLOYEES
 TotalSales and marketing
    
    
    1,826Customer service and supply chain operations
    
    
    983Research and development
    
    
    2,772General and administrative
    
    
    522Total
    
    
    6,103
    11




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EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionRobert Y. L. Mao
    
    
    64
    
    
    Chief Executive OfficerRonald A. Sege
    
    
    51
    
    
    President and Chief Operating OfficerJay Zager
    
    
    58
    
    
    Executive Vice President, Chief Financial OfficerNeal D. Goldman
    
    
    57
    
    
    Executive Vice President, Chief Administrative and Legal Officer and SecretaryDr. Shusheng Zheng
    
    
    41
    
    
    Executive Vice President, Chief Operating Officer, H3C
  Robert Y. L. Mao
 Ronald A. Sege
 Jay Zager
 12




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Neal D. Goldman
 Dr. Shusheng Zheng
 
 ITEM 1A. RISK FACTORS
 
 Risks Related to Historical Losses, Financial Condition and Substantial Indebtedness
 We have incurred significant net losses in recent fiscal periods, including $228.8 million for the
fiscal year ended May 30, 2008, and we may not be able to return to profitability.
  
    
    declining sales due to price competition and reduced incoming order rate;
    
    operating expenses that, as a percentage of sales, have exceeded our desired financial
model;
    
    significant senior leadership and other management changes;
    
    disruptions and expenses resulting from our workforce reductions and employee attrition;
and
    
    interest expense resulting from our senior secured loan.
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Our substantial debt could adversely affect our financial condition; and the related debt service
obligations may adversely affect our cash flow and ability to invest in and grow our businesses.
    
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    limit our ability to obtain additional financing;
    
    require the dedication of a substantial portion of any cash flow from operations to the
payment of principal of, and interest on, our indebtedness, thereby reducing the
availability of such cash flow to fund growth, working capital, capital expenditures and
other general corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business and our
industry; and
    
    place us at a competitive disadvantage relative to our competitors with less debt.
 The restrictions imposed by the terms of our senior secured loan facility could adversely impact
our ability to invest in and grow our H3C business.
  14




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Risks Related to H3C Segment and Dependence Thereon
 We are significantly dependent on our H3C segment; if H3C is not successful we will likely
experience a material adverse impact to our business, business prospects and operating results.
  
    
    maintain a leading position in the networking equipment market in China;
    
    build profitable operations in other emerging markets throughout the world, but
particularly in the Asia Pacific region;
    
    offer new and innovative products and services to attract and retain a larger customer
base;
    
    increase awareness of the H3C brand and continue to develop customer loyalty;
    
    respond to rapidly changing competitive market conditions;
    
    respond to changes in the regulatory environment;
    
    manage risks associated with intellectual property rights, particularly in China;
    
    maintain effective control of costs and expenses; and
    
    attract, retain and motivate qualified personnel.
    We are dependent to a large extent on sales in China, and may face difficulty growing our China
business in the future due to our existing leading market share in China and the economic,
political and social risks inherent in that country.
  We are dependent on Huawei Technologies (Huawei) in several material respects, including as an
important customer; we expect Huawei to reduce its business with H3C, which could materially
adversely affect our business results.
  15




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We must execute on a global strategy to leverage the benefits of our H3C acquisition, including
integration activities to operate more effectively as one company; if we are not successful in
these efforts, our business will suffer.
   If we cannot continue to increase our DVBU segments sales of H3C products outside of China, we
will likely find it increasingly difficult to grow our overall business.
  Risk Related to Personnel
 Our success is dependent on continuing to hire and retain qualified managers and other personnel,
including at our H3C segment, and reducing senior management turnover in our other segments; if we
are not successful in attracting and retaining these personnel, our business will suffer.
    16




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Risks Related to Competition
 Intense competition in the market for networking solutions could prevent us from maintaining or
increasing revenue and achieving profitability.
    Our competition with Huawei in the enterprise networking market could have a material adverse
effect on our sales and our results of operations; and after a contractual non-compete period
expires, Huawei can increase its level of competition, which would likely materially and adversely
affect our business.
   17




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Risks Related to Business and Technology Strategy
 We may not be successful at identifying and responding to new and emerging market and product
opportunities, or at responding quickly enough to technologies or markets that are in decline.
  
    
    identify new market and product opportunities;
    
    predict which technologies and markets will see declining demand;
    
    develop and introduce new products and solutions in a timely manner;
    
    gain market acceptance of new products and solutions, particularly in targeted emerging
markets; and
    
    rapidly and efficiently transition our customers from older to newer enterprise
networking technologies.
  
    
    there is a delay in introducing new products;
    
    we lose certain channels of distribution or key partners;
    
    our products do not satisfy customers in terms of features, functionality or quality; or
    
    our products cost more to produce than we expect.
  We expect to utilize strategic relationships and other alliances as key elements in our strategy.
If we are not successful in forming desired ventures and alliances or if such ventures and
alliances are not successful, our ability to achieve our growth and profitability goals could be
adversely affected.
   Our strategy of outsourcing functions and operations may fail to reduce cost and may disrupt our
operations.
  18




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Our reliance on industry standards, technological change in the marketplace, and new product
initiatives may cause our sales to fluctuate or decline.
  
    
    the convergence of technologies, such as voice, data and video on single, secure
networks;
    
    the timely adoption and market acceptance of industry standards, and timely resolution
of conflicting U.S. and international industry standards; and
    
    our ability to influence the development of emerging industry standards and to introduce
new and enhanced products that are compatible with such standards.
  We focus on enterprise networking, and our results of operations may fluctuate based on factors
related entirely to conditions in this market.
  Risks Related to Operations and Distribution Channels
 A significant portion of our sales is derived from a small number of distributors. If any of these
partners reduces its business with us, our business could be adversely affected.
  We depend on distributors who maintain inventories of our products. If the distributors reduce
their inventories of our products, our sales could be adversely affected.
  19




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If we are unable to successfully develop relationships with system integrators, service providers,
and enterprise VARs, our sales may be negatively affected.
  We may pursue acquisitions of other companies that, if not successful, could adversely affect our
business, financial position and results of operations.
  We may be unable to manage our supply chain successfully, which would adversely impact our sales,
gross margin and profitability.
  
    
    our ability to accurately forecast demand is diminished;
    
    our reliance on, and long-term arrangements with, third-party manufacturers places much
of the supply chain process out of our direct control and heightens the need for accurate
forecasting and reduces our ability to transition quickly to alternative supply chain
strategies; and
    
    we may experience disruptions to our logistics.
   The inability of any contract manufacturer to meet our cost, quality or performance standards could
adversely affect our sales and overall results from operations.
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If we fail to adequately evolve our financial and managerial control and reporting systems and
processes, including the management of our H3C segment, our ability to manage and grow our business
will be negatively affected.
  Risks Related to our Operations in the Peoples Republic of China
 Chinas governmental and regulatory reforms and changing economic environment may impact our
ability to do business in China.
  
    
    the promulgation of new laws and regulations and the interpretation of those laws and
regulations;
    
    enforcement and application of rules and regulations by the Chinese government;
    
    the introduction of measures to control inflation or stimulate growth; or
    
    any actions that limit our ability to develop, manufacture, import or sell our products
in China, or to finance and operate our business in China.
  Uncertainties with respect to the Chinese legal system may adversely affect us.
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If PRC tax benefits available to H3C are reduced or repealed, our business could suffer.
  H3C is subject to restrictions on paying dividends and making other payments to us.
  We are subject to risks relating to currency rate fluctuations and exchange controls and we do not
hedge this risk in China.
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Risks Related to Intellectual Property
 If our products contain undetected software or hardware errors, we could incur significant
unexpected expenses and could lose sales.
   We may need to engage in complex and costly litigation in order to protect, maintain or enforce our
intellectual property rights; in some jurisdictions, such as China, our rights may not be as strong
as the rights we enjoy in the U.S.
   We may not be able to defend ourselves successfully against claims that we are infringing the
intellectual property rights of others.
  23




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OSN, our open source strategy, subjects us to additional intellectual property risks, such as less
control over development of certain technology that forms a part of this strategy and a higher
likelihood of litigation.
  Risks Related to the Trading Market
 Fluctuations in our operating results and other factors may contribute to volatility in the market
price of our stock.
  
    
    fluctuations in our quarterly results of operations and cash flow;
    
    changes in our cash and equivalents and short term investment balances;
    
    our ability to execute on our strategic plan, including, without limitation, any
integration activities we choose to undertake;
    
    variations between our actual financial results and published analysts expectations;
and
    
    announcements by our competitors or significant customers.
  24




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We may be required to record additional significant charges to earnings if our goodwill or
intangible assets become impaired, and the recent decline in our stock price heightens this risk.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 
 Location
    
    Sq. Ft.
    
    Owned/Leased
    
    Primary UseUnited StatesBoston Area
    
    
    175,000
    
    
    Leased
    
    Corporate
headquarters; DVBU
office, research
and development,
and customer
service.United StatesAustin Area
    
    
    87,000
    
    
    Leased
    
    TippingPoints main
office, research
and development,
and customer
service.EuropeU.K.
    
    
    39,000
    
    
    Leased
    
    Corporate and DVBU
offices; DVBU
research and
development, and
customer service.ChinaHangzhou
    
    
    1,682,000
    
    
    Leased
    
    H3C office,
research and
development,
manufacturing,
sales, and
training. Lease
expires January
2009 (under
negotiation for
renewal).ChinaBeijing
    
    
    508,412
    
    
    Leased
    
    H3C research and
development,
training, sales and
customer service.
   25




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 (a)
    
    On March 21, 2008, the Company held a Special Meeting of Stockholders
to vote on (1) a proposal to adopt the Agreement and Plan of Merger
(the Merger Agreement), dated as of September 28, 2007, by and among
the Company, Diamond II Holdings, Inc. and Diamond II Acquisition
Corp. and (2) a proposal to adjourn or postpone the special meeting,
if necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to adopt the
Merger Agreement.(b)
    
    There were 402,388,726 shares eligible to vote as of the record date.
A quorum was present. Both proposals were approved. The following
are the voting results of the proposals:
 Proposal
    
    For
    
    Against
    
    AbstainAdoption of Merger Agreement
    
    
    281,553,408
    
    
    
    7,536,916
    
    
    
    4,206,408Adjournment or postponement, if necessary
    
    
    273,101,179
    
    
    
    19,775,283
    
    
    
    420,271
 
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Fiscal 2008
    
    High
    
    Low
    
    Fiscal 2007
    
    High
    
    LowFirst Quarter
    
    $
    4.81
    
    
    $
    3.24
    
    
    First Quarter
    
    $
    5.31
    
    
    $
    3.95Second Quarter
    
    
    5.11
    
    
    
    3.22
    
    
    Second Quarter
    
    
    5.24
    
    
    
    3.95Third Quarter
    
    
    4.60
    
    
    
    2.76
    
    
    Third Quarter
    
    
    4.24
    
    
    
    3.73Fourth Quarter
    
    
    3.41
    
    
    
    1.76
    
    
    Fourth Quarter
    
    
    4.79
    
    
    
    3.60
  Total Number
    
    
    Averageof Shares
    
    
    Price PaidPeriod
    
    Purchased
    
    
    per ShareMarch 1, 2008 through March 28, 2008
    
    
    239,235
    (1)
    
    $
    2.48March 29, 2008 through April 25, 2008
    
    
    50,743
    (1)
    
    
    2.46April 26, 2008 through May 30, 2008
    
    
    59,248
    (1)
    
    
    2.37Total
    
    
    349,226
    
    
    $
    2.46
 
 (1)
    
    Represents shares surrendered to us to satisfy tax withholding obligations that arose upon
the vesting of restricted stock awards. 26




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COMPARISON OF STOCKHOLDER RETURN
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN *
 
 
 *
    
    $ 100 invested on 5/30/03 in stock or index-including
reinvestment of dividends.Index calculated on month-end basis.Copyright © 2008, Standard & Poors. a division of The McGraw-Hill
Companies, Inc. All rights reserved.wwwresearchdatagroup.com/S&P.htm 5/30/03
    
    5/28/04
    
    6/3/05
    
    6/2/06
    
    6/1/07
    
    5/30/083Com Corporation
    
    
    100.00
    
    
    
    131.77
    
    
    
    72.10
    
    
    
    96.95
    
    
    
    95.52
    
    
    
    51.32S&P 500
    
    
    100.00
    
    
    
    118.33
    
    
    
    128.07
    
    
    
    139.14
    
    
    
    170.85
    
    
    
    159.41New Peer Group
    
    
    100.00
    
    
    
    128.34
    
    
    
    117.83
    
    
    
    137.10
    
    
    
    182.20
    
    
    
    171.17Old Peer Group
    
    
    100.00
    
    
    
    135.18
    
    
    
    119.23
    
    
    
    125.25
    
    
    
    165.16
    
    
    
    163.31
 
 (1)
    
    Our New Peer Group consists of Alcatel Lucent, Cisco Systems Inc., D-Link Corporation, Extreme
Networks, Inc., Foundry Networks, Inc., Hewlett-Packard Company, McAfee, Inc., Netgear Inc., Nortel
Networks Limited and Sourcefire, Inc. Our Old Peer Group consists of Cisco Systems, Inc., Extreme
Networks, Inc., Foundry Networks, Inc., McAfee, Inc. and Netgear Inc. Avaya, Inc was acquired and
has therefore been removed from the Peer Groups. 27




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(2)
    
    Assumes that $100.00 was invested on May 30, 2003 in our common stock and each index, and that
all dividends were reinvested. No cash dividends have been declared on our common stock.
Stockholder returns over the indicated period should not be considered indicative of future
stockholder returns.(3)
    
    3Com uses a 52-53 week fiscal year ending on the Friday nearest to May 31. 
 ITEM 6. SELECTED FINANCIAL DATA
    Fiscal Year May 31,(In thousands, except per share amounts)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Sales
    
    $
    1,294,879
    
    
    $
    1,267,481
    
    
    $
    794,807
    
    
    $
    651,244
    
    
    $
    698,884Net loss
    
    
    (228,841
    )
    
    
    (88,589
    )
    
    
    (100,675
    )
    
    
    (195,686
    )
    
    
    (349,263
    )Loss from continuing operations
    
    
    (228,841
    )
    
    
    (88,589
    )
    
    
    (100,675
    )
    
    
    (195,686
    )
    
    
    (346,863
    )Loss per share from continuing
operations Basic and diluted
    
    $
    (0.57
    )
    
    $
    (0.22
    )
    
    $
    (0.26
    )
    
    $
    (0.51
    )
    
    $
    (0.91
    )
 Balances as of May 31,(In thousands)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Cash, equivalents and short-term investments
    
    $
    503,644
    
    
    $
    559,217
    
    
    $
    864,347
    
    
    $
    844,104
    
    
    $
    1,383,356Total assets
    
    
    1,775,130
    
    
    
    2,151,092
    
    
    
    1,861,361
    
    
    
    1,592,967
    
    
    
    1,820,818Working capital (1)
    
    
    305,444
    
    
    
    257,614
    
    
    
    778,064
    
    
    
    667,949
    
    
    
    1,213,108Deferred taxes and long-term obligations
    
    
    22,367
    
    
    
    23,725
    
    
    
    13,788
    
    
    
    8,484
    
    
    
    15,135Long term debt
    
    
    253,000
    
    
    
    336,000
    
    
    
    
    
    
    
    
    
    
    
    Retained deficit
    
    
    (1,405,247
    )
    
    
    (1,176,406
    )
    
    
    (1,087,512
    )
    
    
    (967,952
    )
    
    
    (755,244
    )Stockholders equity
    
    
    995,302
    
    
    
    1,151,299
    
    
    
    1,202,362
    
    
    
    1,274,923
    
    
    
    1,499,114
 
 (1)
    
    Working capital is defined as total current assets less total current liabilities. 28




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INTRODUCTION
  BUSINESS OVERVIEW
         §
    
    Networking;§
    
    Security;§
    
    Voice;§
    
    Services; and§
    
    Legacy Connectivity Products.
 29




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§
    
    Significant changes to our executive leadership;§
    
    the formation and subsequent 100 percent acquisition of our China-based H3C subsidiary;§
    
    financing a portion of the purchase price for our acquisition of H3C by entering into
a $430 million senior secured credit agreement ;§
    
    acquiring TippingPoint Technologies, Inc;§
    
    restructuring activities, which included outsourcing of information technology, all
manufacturing activity in our DVBU segment, significant headcount reductions in other
functions, and selling excess facilities;§
    
    the termination of the proposed acquisition of the Company by affiliates of Bain
Capital Partners; and§
    
    changing our reporting segments to align with the way we manage our business.
  Significant Events
 H3C
  New Products
  Business Environment and Future Trends
  §
    
    Intense competition in the market for higher end, enterprise core routing and switching products;§
    
    Aggressive product pricing by competitors targeted at gaining share in market segments where we
have had a strong position historically, such as the small to medium-sized enterprise market;
and§
    
    The advanced nature and ready availability of merchant silicon, which allows low-end competitors
to deliver competitive products and makes it increasingly difficult for us to differentiate our
products.
  30




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##### Table of Contents




    
    China- In China, we have been successful in direct-touch sales to enterprise customers
and selling our offerings to the carrier market through our Huawei OEM relationship. With
the end of our joint-venture with Huawei we expect declining sales to Huawei, although we
anticipate they will remain a strategic partner for sales into the carrier market. To
maintain our market-leadership position in China we intend to increase our focus on
direct-touch sales as well as pursue other channels into the carrier market. We believe
that growing market share in China will be more challenging than in the past given that we
already have a significant enterprise networking market share in China.

    
    Emerging markets outside of China- We expect to target growth opportunities outside of
China in other developing markets. We believe that our successful penetration of the
Chinese market has positioned us to grow sales in developing markets generally.

    
    Developed global markets- Our ability to achieve our goal of sales growth in
developed markets depends to a substantial degree on our ability to take market share from
our competitors. Our strategy in developed markets centers around leveraging targeted
selling and marketing investments into the small (and increasingly the medium) business
segment of the enterprise networking market. These sales efforts are currently expected to
focus on our open source, open architecture platforms, and our comprehensive portfolio of
differentiated networking offerings.
   Termination of Proposed Acquisition of the Company
  Segment Reporting
  BASIS OF PRESENTATION
  31




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CRITICAL ACCOUNTING POLICIES
  Revenue recognition:
    32




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##### Table of Contents



Allowance for doubtful accounts:
 Inventories:
 Goodwill and intangible assets:
 33




---



##### Table of Contents



Equity securities and other investments:
 Stock-based Compensation
    Restructuring charges:
 Product Warranty:
 34




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Income taxes:
     RESULTS OF OPERATIONS  YEARS ENDED MAY 31, 2008, 2007, AND 2006
  35




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##### Table of Contents



2008
    
    2007
    
    2006Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    49.5
    
    
    
    54.4
    
    
    
    58.7Gross profit margin
    
    
    50.5
    
    
    
    45.6
    
    
    
    41.3Operating expenses:Sales and marketing
    
    
    24.4
    
    
    
    25.2
    
    
    
    34.6Research and development
    
    
    15.9
    
    
    
    17.0
    
    
    
    12.8General and administrative
    
    
    10.0
    
    
    
    7.4
    
    
    
    9.1Amortization
    
    
    8.0
    
    
    
    3.4
    
    
    
    2.6Goodwill impairment
    
    
    12.2
    
    
    
    
    
    
    
    In-process research and development
    
    
    
    
    
    
    2.8
    
    
    
    0.1Restructuring charges
    
    
    0.3
    
    
    
    0.3
    
    
    
    1.8Total operating expenses
    
    
    70.8
    
    
    
    56.1
    
    
    
    61.0Operating loss
    
    
    (20.3
    )
    
    
    (10.5
    )
    
    
    (19.7
    )Gain on investments, net
    
    
    0.0
    
    
    
    0.1
    
    
    
    0.5Interest (expense) income, net
    
    
    (1.0
    )
    
    
    3.2
    
    
    
    3.6Other income, net
    
    
    3.4
    
    
    
    3.1
    
    
    
    1.0Loss from operations before income taxes, equity interest in
income of unconsolidated joint venture and minority interest
in income of consolidated joint venture
    
    
    (17.9
    )
    
    
    (4.1
    )
    
    
    (14.6
    )Income tax benefit (provision)
    
    
    0.2
    
    
    
    (0.8
    )
    
    
    1.9Equity interest in income of unconsolidated joint venture
    
    
    
    
    
    
    
    
    
    
    1.4Minority interest in income of consolidated joint venture
    
    
    
    
    
    
    (2.1
    )
    
    
    (1.4
    )Net loss
    
    
    (17.7
    )%
    
    
    (7.0
    )%
    
    
    (12.7
    )%
 Comparison of fiscal 2008 and 2007
  Sales
  Fiscal Year2008
    
    
    2007Networking
    
    $
    1,058.5
    
    
    
    81.7
    %
    
    $
    1,028.1
    
    
    
    81.1
    %Security
    
    
    133.4
    
    
    
    10.3
    
    
    
    120.1
    
    
    
    9.5Voice
    
    
    60.7
    
    
    
    4.7
    
    
    
    68.0
    
    
    
    5.4Services
    
    
    39.6
    
    
    
    3.1
    
    
    
    35.9
    
    
    
    2.8Legacy connectivity products
    
    
    2.7
    
    
    
    0.2
    
    
    
    15.4
    
    
    
    1.2Total
    
    $
    1,294.9
    
    
    
    
    
    
    $
    1,267.5
  36




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®
    Fiscal Year2008
    
    
    2007China
    
    $
    609.5
    
    
    
    47.1
    %
    
    $
    587.1
    
    
    
    46.3
    %Europe, Middle East, and Africa
    
    
    292.4
    
    
    
    22.6
    
    
    
    272.8
    
    
    
    21.5North America
    
    
    202.2
    
    
    
    15.6
    
    
    
    233.7
    
    
    
    18.4Asia Pacific excluding China
    
    
    106.8
    
    
    
    8.2
    
    
    
    103.5
    
    
    
    8.2Latin and South America
    
    
    84.0
    
    
    
    6.5
    
    
    
    70.4
    
    
    
    5.6Total
    
    $
    1,294.9
    
    
    
    
    
    
    $
    1,267.5
       37




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Gross Margin
  Fiscal Year2008
    
    2007H3C
    
    
    55.1
    %
    
    
    47.2
    %DVBU
    
    
    31.3
    
    
    
    32.9TippingPoint
    
    
    67.4
    
    
    
    66.9Intercompany eliminations and other
    
    
    10.2
    
    
    
    8.0Gross Margin
    
    
    50.5
    %
    
    
    45.6
    %
     Operating Expenses
   38




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##### Table of Contents



Sales and Marketing.
 Research and Development
 General and Administrative
 Amortization.
 In-process research and development.
 Restructuring Charges
 Gain on Investments, Net
  Interest (Expense) Income and Other Income, Net
  39




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##### Table of Contents



Income Tax Benefit (Provision)
   Minority Interest in Income of Consolidated Joint Venture
  Comparison of fiscal 2007 and 2006
  Sales
   Fiscal Year2007
    
    
    2006Networking
    
    $
    1,028.1
    
    
    
    81.1
    %
    
    $
    577.0
    
    
    
    72.6
    %Security
    
    
    120.1
    
    
    
    9.5
    
    
    
    88.0
    
    
    
    11.1Voice
    
    
    68.0
    
    
    
    5.4
    
    
    
    56.6
    
    
    
    7.1Services
    
    
    35.9
    
    
    
    2.8
    
    
    
    33.4
    
    
    
    4.2Connectivity Products
    
    
    15.4
    
    
    
    1.2
    
    
    
    39.8
    
    
    
    5.0Total
    
    $
    1,267.5
    
    
    
    
    
    
    $
    794.8
 40




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##### Table of Contents



®
    Fiscal Year2007
    
    
    2006North America
    
    $
    233.7
    
    
    
    18.4
    %
    
    $
    248.5
    
    
    
    31.3
    %Latin and South America
    
    
    70.4
    
    
    
    5.6
    
    
    
    72.2
    
    
    
    9.1Europe,
Middle East, and Africa
    
    
    272.8
    
    
    
    21.5
    
    
    
    298.5
    
    
    
    37.5Asia Pacific, excluding China
    
    
    103.5
    
    
    
    8.2
    
    
    
    91.4
    
    
    
    11.5China
    
    
    587.1
    
    
    
    46.3
    
    
    
    84.2
    
    
    
    10.6Total
    
    $
    1,267.5
    
    
    
    
    
    
    $
    794.8
  Gross Margin
  Fiscal Year2007
    
    2006H3C
    
    
    47.2
    %
    
    
    47.5
    %DVBU
    
    
    32.9
    
    
    
    35.7TippingPoint
    
    
    66.9
    
    
    
    70.6Intercompany eliminations and other
    
    
    8.0
    
    
    
    0.0Gross Margin
    
    
    45.6
    %
    
    
    41.3
    %
   41




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##### Table of Contents



Operating Expenses
    Sales and Marketing.
 Research and Development
 General and Administrative
 42




---



##### Table of Contents



Amortization and Write-Down of Intangibles.
 In-process research and development.
 Restructuring Charges
 Gain on Investments, Net
  Interest Income and Other Income (Expense), Net
  Income Tax (Provision) Benefit
  Minority Interest in the Income of Consolidated Joint Venture
  43




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LIQUIDITY AND CAPITAL RESOURCES
  2008
    
    
    2007
    
    
    2006Cash and equivalents
    
    $
    503.6
    
    
    $
    559.2
    
    
    $
    501.1Short-term investments
    
    
    
    
    
    
    
    
    
    
    363.2Cash and equivalents and short term investments
    
    $
    503.6
    
    
    $
    559.2
    
    
    $
    864.3
   Years Ended May 31,(in millions)
    
    2008
    
    
    2007
    
    
    2006Cash and equivalents, beginning of period
    
    $
    559.2
    
    
    $
    501.1
    
    
    $
    268.5Net cash provided by (used in) operating activities
    
    
    54.9
    
    
    
    165.5
    
    
    
    (86.2
    )Net cash (used in) provided by investing activities
    
    
    (16.4
    )
    
    
    (505.9
    )
    
    
    300.8Net cash (used in) provided by financing activities
    
    
    (123.9
    )
    
    
    387.9
    
    
    
    15.7Other (1)
    
    
    29.8
    
    
    
    10.6
    
    
    
    2.3Cash and equivalents, end of period
    
    $
    503.6
    
    
    $
    559.2
    
    
    $
    501.1
 
 (1)
    
    Other primarily represents currency exchange appreciation for cash held in Renminbi    Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations (1)(2)
    
    Total
    
    
    one year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsOperating leases
    
    $
    57.2
    
    
    $
    35.0
    
    
    $
    22.1
    
    
    $
    0.1
    
    
    $
    Purchase commitments with
contract manufacturers (3)
    
    
    65.4
    
    
    
    65.3
    
    
    
    0.1
    
    
    
    
    
    
    
    Long term debt (4)
    
    
    301.0
    
    
    
    48.0
    
    
    
    116.0
    
    
    
    137.0
    
    
    
    Outsourcing agreements (5)
    
    
    15.1
    
    
    
    15.1
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    438.7
    
    
    $
    163.4
    
    
    $
    138.2
    
    
    $
    137.1
    
    
    $
    
 
 (1)
    
    Includes DVBU, TippingPoint and Corporate segment obligations as of May 31, 2008 and H3C
segment obligations as of March 31, 2008.(2)
    
    As discussed in Note 17  Income Taxes, we have recorded a liability for unrecognized tax
benefits of $18.2 million. This liability is included in the balance sheet under the caption
Deferred taxes and long-term obligations. The table above excludes this liability because it is
not possible to estimate with reasonable certainty if or when any or all of the liability will be
settled in cash. 44




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##### Table of Contents



(3)
    
    We have entered into purchase agreements with our contract manufacturers. Pursuant to these
agreements, if our actual orders and purchases fall below forecasted levels, we may be required to
purchase finished goods inventory manufactured to meet our requirements. In addition, we may be
required to purchase raw material and work in process inventory on-hand that is unique to our
products, and we may be required to compensate the contract manufacturers with respect to their
non-cancelable purchase orders for such inventory. The amount shown in the table above represents
our estimate of inventory held by contract manufacturers that we could be required to purchase
within the next 12 months. We do not expect any such required purchases to exceed our requirements
for inventory to meet expected sales of our products to our customers.(4)
    
    Represents required principal payments on our senior secured loan, but does not include
required excess cash flow payments, for periods greater than one year, which are dependent on
whether H3C generates any excess cash flow.(5)
    
    Under our IT outsourcing agreements and research and development agreement we are subject to
service level commitments and contractor commitments levels providing for annual minimum payments
that vary depending on the levels we choose. The amounts shown in the table above represent the
amounts that would be payable, based on current levels, through the expiration of the agreements.
However, our IT agreement may be terminated at any time upon 120 days notice and the payment of a
termination fee of approximately $0.3 million, and our research and development agreement may be
terminated at any time with a $0.8 million payment.      45




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##### Table of Contents



plus
 Leverage Ratio
    
    LIBOR +
    
    Base Rate +>3.0:10
    
    
    2.25
    %
    
    
    1.25
    %£
 3.0:1.0 but > 2.0:1.0
    
    
    2.00
    %
    
    
    1.00
    %£ 2.0:1.0 but > 1.0:1.0
    
    
    1.75
    %
    
    
    0.75
    %£ 1.0:1.0
    
    
    1.50
    %
    
    
    0.50
    %
 plus
     Tranche A
    
    Tranche B2009
    
    $
    46,000
    
    
    $
    2,0002010
    
    
    46,000
    
    
    
    2,0002011
    
    
    46,000
    
    
    
    2,0002012
    
    
    
    
    
    
    20,0002013
    
    
    
    
    
    
    137,000
  46




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##### Table of Contents



2009
    
    $
    34,5002010
    
    
    27,0002011
    
    
    17,000
   EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk Disclosures
 Interest Rate Sensitivity
 Foreign Currency Exchange Risk
  47




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 PageConsolidated Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    49Consolidated Statements of Operations for the years ended May 31,
2008, 2007, and 2006
    
    
    50Consolidated Balance Sheets as of May 31, 2008 and 2007
    
    
    51Consolidated Statements of Stockholders Equity for the years ended
May 31, 2008, 2007, and 2006
    
    
    52Consolidated Statements of Cash Flows for the years ended May 31,
2008, 2007, and 2006
    
    
    53Notes to Consolidated Financial Statements
    
    
    54Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts and Reserves
    
    
    97
  48




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based Payment
 Internal ControlIntegrated Framework
  
 49




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##### Table of Contents



3COM CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended May 31,2008
    
    
    2007
    
    
    2006Sales
    
    $
    1,294,879
    
    
    $
    1,267,481
    
    
    $
    794,807Cost of sales
    
    
    640,424
    
    
    
    689,027
    
    
    
    466,743Gross profit
    
    
    654,455
    
    
    
    578,454
    
    
    
    328,064Operating expenses:Sales and marketing
    
    
    316,019
    
    
    
    319,696
    
    
    
    274,745Research and development
    
    
    206,653
    
    
    
    215,632
    
    
    
    101,870General and administrative
    
    
    129,116
    
    
    
    93,875
    
    
    
    72,596Amortization
    
    
    103,670
    
    
    
    42,525
    
    
    
    20,903Goodwill impairment
    
    
    157,977
    
    
    
    
    
    
    
    In-process research and development
    
    
    
    
    
    
    35,753
    
    
    
    650Restructuring charges
    
    
    4,501
    
    
    
    3,494
    
    
    
    14,403Total operating expenses
    
    
    917,936
    
    
    
    710,975
    
    
    
    485,167Operating loss
    
    
    (263,481
    )
    
    
    (132,521
    )
    
    
    (157,103
    )Gain on investments, net
    
    
    460
    
    
    
    1,143
    
    
    
    4,333Interest (expense) income, net
    
    
    (13,087
    )
    
    
    40,863
    
    
    
    29,085Other income, net
    
    
    44,364
    
    
    
    38,291
    
    
    
    8,235Loss from operations before income taxes, equity
interest in income of unconsolidated joint venture, and
minority interest in income of consolidated joint
venture
    
    
    (231,744
    )
    
    
    (52,224
    )
    
    
    (115,450
    )Income tax benefit (provision)
    
    
    2,903
    
    
    
    (10,173
    )
    
    
    14,833Equity interest in income of unconsolidated joint venture
    
    
    
    
    
    
    
    
    
    
    11,016Minority interest in income of consolidated joint venture
    
    
    
    
    
    
    (26,192
    )
    
    
    (11,074
    )Net loss
    
    $
    (228,841
    )
    
    $
    (88,589
    )
    
    $
    (100,675
    )Basic and diluted net loss per share:Net loss
    
    $
    (0.57
    )
    
    $
    (0.22
    )
    
    $
    (0.26
    )Shares used in computing per share amounts:Basic and diluted
    
    
    399,524
    
    
    
    393,894
    
    
    
    386,801
 The accompanying notes are an integral part of these consolidated financial statements.
 50




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3COM CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 May 31,2008
    
    
    2007ASSETSCurrent assets:Cash and equivalents
    
    $
    503,644
    
    
    $
    559,217Notes receivable
    
    
    65,116
    
    
    
    77,368Accounts receivable, less allowance
for doubtful accounts of $12,253 and
$15,292, respectively
    
    
    116,281
    
    
    
    102,952Inventories
    
    
    90,831
    
    
    
    107,988Other current assets
    
    
    34,033
    
    
    
    50,157Total current assets
    
    
    809,905
    
    
    
    897,682Property and equipment, less accumulated
depreciation and amortization of $205,835
and $234,554, respectively
    
    
    54,314
    
    
    
    76,460Goodwill
    
    
    609,297
    
    
    
    766,444Intangible assets, net
    
    
    278,385
    
    
    
    371,289Deposits and other assets
    
    
    23,229
    
    
    
    39,217Total assets
    
    $
    1,775,130
    
    
    $
    2,151,092LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    90,280
    
    
    $
    110,430Current portion of long-term debt
    
    
    48,000
    
    
    
    94,000Accrued liabilities and other
    
    
    366,181
    
    
    
    435,638Total current liabilities
    
    
    504,461
    
    
    
    640,068Deferred taxes and long-term obligations
    
    
    22,367
    
    
    
    23,725Long-term debt
    
    
    253,000
    
    
    
    336,000Stockholders equity:Preferred stock, $0.01 par value,
10,000 shares authorized; none
outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value,
990,000 shares authorized; shares
issued: 405,656 and 399,064,
respectively
    
    
    2,353,688
    
    
    
    2,323,356Retained deficit
    
    
    (1,405,247
    )
    
    
    (1,176,406
    )Accumulated other comprehensive income
    
    
    46,861
    
    
    
    4,349Total stockholders equity
    
    
    995,302
    
    
    
    1,151,299Total liabilities and stockholders equity
    
    $
    1,775,130
    
    
    $
    2,151,092
 The accompanying notes are an integral part of these consolidated financial statements.
 51




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##### Table of Contents



3COM CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedUnamortized
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Treasury Stock
    
    
    Stock-based
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Compensation
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalances, May 31, 2005
    
    
    393,377
    
    
    
    2,302,190
    
    
    
    (8,135
    )
    
    $
    (39,821
    )
    
    $
    (14,011
    )
    
    $
    (967,952
    )
    
    $
    (5,483
    )
    
    $
    1,274,923Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,675
    )
    
    
    
    
    
    
    (100,675
    )Unrealized gain on
available-for-sale securities, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    300Accumulated translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,226
    
    
    
    2,226Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,149
    )Repurchase of common stock
    
    
    (588
    )
    
    
    (2,848
    )
    
    
    (864
    )
    
    
    (4,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,076
    )Common stock issued under stock plans,
net of cancellations
    
    
    653
    
    
    
    2,230
    
    
    
    8,999
    
    
    
    44,049
    
    
    
    (4,593
    )
    
    
    (18,885
    )
    
    
    
    
    
    
    22,801Stock-based compensation expense
    
    
    
    
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    9,664
    
    
    
    
    
    
    
    
    
    
    
    9,863Reduction of shares reserved for
issuance of options in connection with
acquisition
    
    
    
    
    
    
    (1,375
    )
    
    
    
    
    
    
    
    
    
    
    1,375
    
    
    
    
    
    
    
    
    
    
    
    Balances, May 31, 2006
    
    
    393,442
    
    
    
    2,300,396
    
    
    
    
    
    
    
    
    
    
    
    (7,565
    )
    
    
    (1,087,512
    )
    
    
    (2,957
    )
    
    
    1,202,362Elimination of unamortized stock-based
compensation
    
    
    
    
    
    
    (7,565
    )
    
    
    
    
    
    
    
    
    
    
    7,565
    
    
    
    
    
    
    
    
    
    
    
    Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,589
    )
    
    
    
    
    
    
    (88,589
    )Unrealized gain on
available-for-sale securities, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,310
    
    
    
    2,310Accumulated translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,996
    
    
    
    4,996Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,283
    )Repurchase of common stock
    
    
    (2,359
    )
    
    
    (9,041
    )
    
    
    (870
    )
    
    
    (4,259
    )
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    (13,463
    )Common stock issued under stock plans,
net of cancellations
    
    
    7,981
    
    
    
    19,471
    
    
    
    870
    
    
    
    4,259
    
    
    
    
    
    
    
    (142
    )
    
    
    
    
    
    
    23,588Stock-based compensation expense
    
    
    
    
    
    
    20,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,095Balances, May 31, 2007
    
    
    399,064
    
    
    
    2,323,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,176,406
    )
    
    
    4,349
    
    
    
    1,151,299Components of comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228,841
    )
    
    
    
    
    
    
    (228,841
    )Unrealized loss on
available-for-sale securities, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209
    )
    
    
    (209
    )Accumulated translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,721
    
    
    
    42,721Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (186,329
    )Repurchase of common stock
    
    
    (952
    )
    
    
    (3,180
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,180
    )Common stock issued under stock plans,
net of cancellations
    
    
    7,544
    
    
    
    8,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,305Stock-based compensation expense
    
    
    
    
    
    
    25,207
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,207Balances, May 31, 2008
    
    
    405,656
    
    
    $
    2,353,688
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1,405,247
    )
    
    $
    46,861
    
    
    $
    995,302
 The accompanying notes are an integral part of these consolidated financial statements.
 52




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##### Table of Contents



3COM CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended May 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (228,841
    )
    
    $
    (88,589
    )
    
    $
    (100,675
    )Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    136,030
    
    
    
    74,990
    
    
    
    44,685Loss (gain) on property and equipment disposals
    
    
    2,224
    
    
    
    (14,714
    )
    
    
    (646
    )Minority interest
    
    
    
    
    
    
    26,192
    
    
    
    11,074Stock-based compensation expense
    
    
    25,207
    
    
    
    20,095
    
    
    
    9,863Gain on investments, net
    
    
    (185
    )
    
    
    (1,417
    )
    
    
    (235
    )Deferred income taxes
    
    
    (8,206
    )
    
    
    (10,487
    )
    
    
    121Goodwill impairment
    
    
    157,977
    
    
    
    
    
    
    
    In-process research and development
    
    
    
    
    
    
    35,753
    
    
    
    650Equity interest in income of unconsolidated joint venture
    
    
    
    
    
    
    
    
    
    
    (11,016
    )Changes in assets and liabilities:Accounts receivable
    
    
    7,895
    
    
    
    (24,677
    )
    
    
    5,913Inventories
    
    
    32,621
    
    
    
    50,589
    
    
    
    (23,047
    )Other assets
    
    
    18,429
    
    
    
    32,368
    
    
    
    1,891Accounts payable
    
    
    (22,926
    )
    
    
    (34,760
    )
    
    
    3,430Other liabilities
    
    
    (65,348
    )
    
    
    100,195
    
    
    
    (28,172
    )Net cash provided by (used in) operating activities
    
    
    54,877
    
    
    
    165,538
    
    
    
    (86,164
    )Cash flows from investing activities:Purchases of investments
    
    
    
    
    
    
    (225,005
    )
    
    
    (421,279
    )Proceeds from maturities and sales of investments
    
    
    442
    
    
    
    609,342
    
    
    
    629,036Purchases of property and equipment
    
    
    (17,893
    )
    
    
    (28,331
    )
    
    
    (17,404
    )Businesses
acquired in purchase transactions, net of cash acquired
    
    
    
    
    
    
    (898,529
    )
    
    
    110,407Proceeds from sale of property and equipment
    
    
    1,096
    
    
    
    36,580
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (16,355
    )
    
    
    (505,943
    )
    
    
    300,760Cash flows from financing activities:Issuances of common stock
    
    
    8,305
    
    
    
    23,588
    
    
    
    22,801Repurchases of common stock
    
    
    (3,180
    )
    
    
    (13,463
    )
    
    
    (7,076
    )Net proceeds from long term debt
    
    
    
    
    
    
    415,811
    
    
    
    Repayments of borrowings
    
    
    (129,000
    )
    
    
    
    
    
    
    Dividend paid to minority interest shareholder
    
    
    
    
    
    
    (40,785
    )
    
    
    Other, net
    
    
    
    
    
    
    2,787
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (123,875
    )
    
    
    387,938
    
    
    
    15,725Effect of exchange rate changes on cash and equivalents
    
    
    29,780
    
    
    
    10,587
    
    
    
    2,241Net change in cash and equivalents during period
    
    
    (55,573
    )
    
    
    58,120
    
    
    
    232,562Cash and equivalents, beginning of period
    
    
    559,217
    
    
    
    501,097
    
    
    
    268,535Cash and equivalents, end of period
    
    $
    503,644
    
    
    $
    559,217
    
    
    $
    501,097Other cash flow informationInterest paid
    
    $
    24,362
    
    
    $
    5,596
    
    
    $
    212Income tax (payments) refunds received, net
    
    
    (14,199
    )
    
    
    (18,970
    )
    
    
    (2,230
    )Inventory transferred to property and equipment
    
    
    5,565
    
    
    
    8,814
    
    
    
    16,995
 The accompanying notes are an integral part of these consolidated financial statements.
 53




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Description of Business
  Note 2: Significant Accounting Policies
 Fiscal
year
  Use of estimates in the preparation of consolidated financial statements
  Basis of presentation
  Segment reporting
  Cash equivalents
  54




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##### Table of Contents



Notes receivable
  Allowance for doubtful accounts
  Equity securities and other investments
  Concentration of credit risk
  Inventories
  Property and equipment
  Long-lived assets
  Depreciation and amortization
  55




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##### Table of Contents



Goodwill and purchased intangible assets
  Revenue recognition
       56




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##### Table of Contents



Product warranty
  Advertising
  Restructuring charges
  Foreign currency remeasurement and translation
    57




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##### Table of Contents



Income taxes
      Comprehensive income (loss)
   AccumulatedAccumulated
    
    
    OtherUnrealized
    
    
    Translation
    
    
    ComprehensiveGain (Loss)
    
    
    Adjustments
    
    
    Income (Loss)Balance as of May 31, 2005
    
    $
    (2,401
    )
    
    $
    (3,082
    )
    
    $
    (5,483
    )Change in period
    
    
    300
    
    
    
    2,226
    
    
    
    2,526Balance as of May 31, 2006
    
    
    (2,101
    )
    
    
    (856
    )
    
    
    (2,957
    )Change in period
    
    
    2,310
    
    
    
    4,996
    
    
    
    7,306Balance as of May 31, 2007
    
    
    209
    
    
    
    4,140
    
    
    
    4,349Change in period
    
    
    (209
    )
    
    
    42,721
    
    
    
    42,512Balance as of May 31, 2008
    
    $
    
    
    
    $
    46,861
    
    
    $
    46,861
 58




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##### Table of Contents



Stock-based Compensation
     Net loss per share
  Recently issued accounting pronouncements
  59




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##### Table of Contents



60




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##### Table of Contents



Note 3: Acquisitions
 H3C
       2003
    
    
    2006
    
    
    2007Investment
    
    
    Purchase
    
    
    PurchaseCash paid for common stock
    
    $
    160.0
    
    
    $
    28.0
    
    
    $
    882.0Assets contributed
    
    
    0.1
    
    
    
    
    
    
    
    Acquisition direct costs
    
    
    0.0
    
    
    
    0.2
    
    
    
    8.7Total purchase price
    
    $
    160.1
    
    
    $
    28.2
    
    
    $
    890.7
 61




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##### Table of Contents



2003
    
    
    2006
    
    
    2007Investment
    
    
    Purchase
    
    
    PurchaseNet tangible assets assumed
    
    
    
    
    
    $
    7.4
    
    
    $
    148.6Amortizable intangible assets:Existing technology
    
    $
    111.7
    
    
    
    17.8
    
    
    
    180.6Trade name and trademarks
    
    
    
    
    
    
    
    
    
    
    55.5Non-compete agreement with Huawei
    
    
    
    
    
    
    
    
    
    
    33.0Distributor agreements
    
    
    2.7
    
    
    
    0.4
    
    
    
    29.1Total amortizable intangible assets
    
    
    114.4
    
    
    
    18.2
    
    
    
    298.2Amortization prior to the 2006 acquisition
    
    
    (65.7
    )
    
    
    
    
    
    
    Net intangible assets
    
    
    48.7
    
    
    
    18.2
    
    
    
    298.2In-process research and development
    
    
    24.7
    
    
    
    0.7
    
    
    
    34.0Goodwill
    
    
    43.2
    
    
    
    1.9
    
    
    
    409.9Total purchase price allocation
    
    
    
    
    
    $
    28.2
    
    
    $
    890.7
      62




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##### Table of Contents



Pro forma Results of Operations
  Fiscal Year(in millions, except per share amounts)
    
    2007
    
    2006Net sales
    
    $
    1,267.5
    
    
    $
    1,146.8Net loss
    
    
    (201.3
    )
    
    
    (102.2
    )Basic and diluted net loss per share
    
    $
    (0.51
    )
    
    $
    (0.26
    )
  Roving Planet Acquisition
   2007
    
    
    Useful Life forPreliminary Purchase
    
    
    PurchasedPrice Allocation
    
    
    Intangible AssetsIn-process research and development
    
    $
    1.7
    
    
    
    Purchased core technology
    
    
    3.1
    
    
    
    3 yearsGoodwill
    
    
    3.2
    
    
    
    Other
    
    
    0.2
    
    
    
    Total acquisition value
    
    $
    8.2
    
    
    
    
 Note 4: Restructuring Charges
   §
    
    reduced our workforce; and§
    
    continued efforts to consolidate and dispose of excess facilities.
   63




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Fiscal 2008 Actions
  EmployeeSeparationExpense
    
    
    TotalBalance as of May 31, 2007
    
    $
    
    
    
    $
    Provisions
    
    
    4,285
    
    
    
    4,285Payments
    
    
    (3,598
    )
    
    
    (3,598
    )Balance as of May 31, 2008
    
    $
    687
    
    
    $
    687
   Fiscal 2007 Actions
  Employee
    
    
    Facilities-
    
    
    OtherSeparation
    
    
    related
    
    
    RestructuringExpense
    
    
    Charges
    
    
    Costs
    
    
    TotalBalance as of May 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Provisions
    
    
    12,134
    
    
    
    (7,501
    )
    
    
    247
    
    
    
    4,880Payments and non-cash charges
    
    
    (10,804
    )
    
    
    7,765
    
    
    
    (247
    )
    
    
    (3,286
    )Balance as of May 31, 2007
    
    
    1,330
    
    
    
    264
    
    
    
    
    
    
    
    1,594Provisions
    
    
    (93
    )
    
    
    71
    
    
    
    53
    
    
    
    31Payments
    
    
    (1,237
    )
    
    
    (198
    )
    
    
    (53
    )
    
    
    (1,488
    )Balance as of May 31, 2008
    
    $
    
    
    
    $
    137
    
    
    $
    
    
    
    $
    137
   64




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##### Table of Contents



Fiscal 2006 Actions
  Employee
    
    
    Facilities-Separation
    
    
    relatedExpense
    
    
    Charges
    
    
    TotalBalance as of May 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    Provisions
    
    
    9,558
    
    
    
    1,635
    
    
    
    11,193Payments and non-cash charges
    
    
    (4,681
    )
    
    
    (744
    )
    
    
    (5,425
    )Balance as of May 31, 2006
    
    
    4,877
    
    
    
    891
    
    
    
    5,768Provisions
    
    
    (688
    )
    
    
    (136
    )
    
    
    (824
    )Payments and non-cash charges
    
    
    (4,189
    )
    
    
    (619
    )
    
    
    (4,808
    )Balance as of May 31, 2007
    
    
    
    
    
    
    136
    
    
    
    136Provisions
    
    
    
    
    
    
    7
    
    
    
    7Payments
    
    
    
    
    
    
    (143
    )
    
    
    (143
    )Balance as of May 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
  Fiscal 2001, 2002, 2003, 2004, and 2005 Actions
  Employee
    
    
    Long-term
    
    
    Facilities-
    
    
    OtherSeparation
    
    
    Asset
    
    
    related
    
    
    RestructuringExpense
    
    
    Write-downs
    
    
    Charges
    
    
    Costs
    
    
    TotalBalance as of May 31, 2005
    
    $
    8,205
    
    
    $
    255
    
    
    $
    9,129
    
    
    $
    18
    
    
    $
    17,607Provisions
    
    
    1,873
    
    
    
    311
    
    
    
    641
    
    
    
    364
    
    
    
    3,189Payments and non-cash charges
    
    
    (8,235
    )
    
    
    (311
    )
    
    
    (4,129
    )
    
    
    (364
    )
    
    
    (13,039
    )Balance as of May 31, 2006
    
    
    1,843
    
    
    
    255
    
    
    
    5,641
    
    
    
    18
    
    
    
    7,757Provisions
    
    
    (1,395
    )
    
    
    (255
    )
    
    
    1,085
    
    
    
    3
    
    
    
    (562
    )Payments and non-cash charges
    
    
    (145
    )
    
    
    
    
    
    
    (5,383
    )
    
    
    (21
    )
    
    
    (5,549
    )Balance as of May 31, 2007
    
    
    303
    
    
    
    
    
    
    
    1,343
    
    
    
    
    
    
    
    1,646Provisions
    
    
    133
    
    
    
    
    
    
    
    42
    
    
    
    3
    
    
    
    178Payments
    
    
    (408
    )
    
    
    
    
    
    
    (837
    )
    
    
    (3
    )
    
    
    (1,248
    )Balance as of May 31, 2008
    
    $
    28
    
    
    $
    
    
    
    $
    548
    
    
    $
    
    
    
    $
    576
  65




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##### Table of Contents



Note 5: Investment in Unconsolidated Joint Venture
    Sales
    
    $
    399,612Gross profit
    
    
    181,553Income from operations
    
    
    10,132Net income
    
    
    22,487
   Note 6: Investments
   May 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValuePublicly traded corporate equity securities
    
    $
    257
    
    
    $
    210
    
    
    $
    
    
    
    $
    467Total
    
    $
    257
    
    
    $
    210
    
    
    $
    
    
    
    $
    467
 66




---



##### Table of Contents



May 31, 2007Publicly traded corporate equity securities
    
    
    
    
    
    $
    467Total corporate equity securities
    
    
    
    
    
    $
    467
   Years Ended May 31,2008
    
    
    2007
    
    
    2006Gross realized gains
    
    $
    460
    
    
    $
    3,560
    
    
    $
    5,499Gross realized losses
    
    
    
    
    
    
    (2,417
    )
    
    
    (1,166
    )Total
    
    $
    460
    
    
    $
    1,143
    
    
    $
    4,333
 Note 7: Inventories
  May 31,2008
    
    
    2007Finished goods
    
    $
    62,055
    
    
    $
    61,857Work-in-process
    
    
    6,119
    
    
    
    7,143Raw materials
    
    
    22,657
    
    
    
    38,988Total
    
    $
    90,831
    
    
    $
    107,988
 Note 8: Property and Equipment
  May 31,2008
    
    
    2007Land
    
    $
    1,724
    
    
    $
    1,724Machinery and equipment
    
    
    196,933
    
    
    
    231,886Software
    
    
    25,988
    
    
    
    31,387Furniture and fixtures
    
    
    6,668
    
    
    
    20,217Leasehold improvements
    
    
    23,390
    
    
    
    17,201Construction in progress
    
    
    5,446
    
    
    
    8,599Total
    
    
    260,149
    
    
    
    311,014Accumulated depreciation and amortization
    
    
    (205,835
    )
    
    
    (234,554
    )Property and equipment, net
    
    $
    54,314
    
    
    $
    76,460
 67




---



##### Table of Contents



Significant property and equipment transactions
   Note 9: Goodwill and Other Intangible Assets
    Balance May 31, 2007
    
    $
    311,380Impairment charge
    
    
    (157,977
    )Balance May 31, 2008
    
    $
    153,403
  2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    AccumulatedLife
    
    
    Gross
    
    
    Amortization
    
    
    Net
    
    
    Life
    
    
    Gross
    
    
    Amortization
    
    
    NetExisting technology
    
    
    3.6
    
    
    $
    380,254
    
    
    $
    (198,682
    )
    
    $
    181,572
    
    
    
    4.4
    
    
    $
    387,233
    
    
    $
    (148,641
    )
    
    $
    238,592Trademark
    

    NA
    
    
    
    55,502
    
    
    
    
    
    
    
    55,502
    
    

    NA
    

    
    
    55,500
    
    
    
    
    
    
    
    55,500Huawei non-compete
    
    
    0.5
    
    
    
    33,650
    
    
    
    (22,072
    )
    
    
    11,578
    
    
    
    1.5
    
    
    
    33,000
    
    
    
    (61
    )
    
    
    32,939OEM agreement
    
    
    2.0
    
    
    
    24,844
    
    
    
    (7,947
    )
    
    
    16,897
    
    
    
    3.0
    
    
    
    23,800
    
    
    
    (22
    )
    
    
    23,778Maintenance agreements
    
    
    2.7
    
    
    
    19,000
    
    
    
    (10,556
    )
    
    
    8,444
    
    
    
    3.7
    
    
    
    19,000
    
    
    
    (7,389
    )
    
    
    11,611Other
    
    
    2.0
    
    
    
    22,176
    
    
    
    (17,784
    )
    
    
    4,392
    
    
    
    3.0
    
    
    
    21,924
    
    
    
    (13,055
    )
    
    
    8,869$
    535,426
    
    
    $
    (257,041
    )
    
    $
    278,385
    
    
    
    
    
    
    $
    540,457
    
    
    $
    (169,168
    )
    
    $
    371,289
 68




---



##### Table of Contents



2009
    
    2010
    
    2011
    
    2012
    
    2013Amortization expense
    
    $
    85,033
    
    
    $
    60,337
    
    
    $
    36,700
    
    
    $
    15,163
    
    
    $
    15,121
 Note 10: Accrued Liabilities and Other
  May 31,2008
    
    
    2007Accrued payroll and related expenses
    
    $
    103,421
    
    
    $
    81,791Accrued rebates and other marketing
    
    
    65,900
    
    
    
    67,446Deferred revenue
    
    
    66,844
    
    
    
    54,034Accrued product warranty
    
    
    36,897
    
    
    
    40,596EARP Accrual
    
    
    34,535
    
    
    
    94,563Advances from customers
    
    
    31,084
    
    
    
    8,300Income and other taxes payable
    
    
    5,134
    
    
    
    36,365Restructuring
    
    
    1,400
    
    
    
    3,376Other
    
    
    20,966
    
    
    
    49,167Total
    
    $
    366,181
    
    
    $
    435,638
 Note 11: Accrued Warranty and Other Guarantees
   Years Ended May 31,2008
    
    
    2007
    
    
    2006Accrued warranty, beginning of period
    
    $
    40,596
    
    
    $
    41,791
    
    
    $
    41,782Cost of warranty claims
    
    
    (37,688
    )
    
    
    (46,950
    )
    
    
    (32,958
    )Accrual for warranties issued during the period
    
    
    33,989
    
    
    
    46,406
    
    
    
    28,424Adjustments to preexisting warranties
    
    
    
    
    
    
    (651
    )
    
    
    Reserves related to H3C at date of 2 percent acquisition
    
    
    
    
    
    
    
    
    
    
    4,543Accrued warranty, end of period
    
    $
    36,897
    
    
    $
    40,596
    
    
    $
    41,791
 69




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##### Table of Contents



Note 12: Long-Term Debt
      Tranche A
    
    
    Tranche B2009
    
    $
    46,000
    
    
    $
    2,0002010
    
    
    46,000
    
    
    
    2,0002011
    
    
    46,000
    
    
    
    2,0002012
    
    
    
    
    
    
    20,0002013
    
    
    
    
    
    
    137,000
 Note 13: Borrowing Arrangements and Commitments
    Future Lease
    
    
    Future RentalFiscal year
    
    Payments
    
    
    Income2009
    
    $
    35,002
    
    
    $
    562010
    
    
    21,021
    
    
    
    582011
    
    
    622
    
    
    
    52012
    
    
    461
    
    
    
    2013
    
    
    72
    
    
    
    Total
    
    $
    57,178
    
    
    $
    119
  70




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##### Table of Contents



Note 14: Stock Based Compensation Plans
 Stock
Based Compensation
     (In thousands)
    
    May 31, 2008
    
    
    May 31, 2007Cost of sales
    
    $
    2,134
    
    
    $
    1,576Sales and marketing
    
    
    5,976
    
    
    
    5,756Research and development
    
    
    3,993
    
    
    
    4,621General and administrative
    
    
    13,104
    
    
    
    8,142Share-based compensation
    
    $
    25,207
    
    
    $
    20,095
 71




---



##### Table of Contents



(In thousands, except per share amounts)
    
    Year EndedMay 31, 2006Net loss as reported
    
    $
    (100,675
    )Add: Stock-based compensation included in reported net loss
    
    
    9,863Deduct: Total stock-based compensation determined under the
fair value-based method, net of related tax effects
    
    
    (25,496
    )Adjusted net loss
    
    $
    (116,308
    )Net loss per share-basic and diluted:As reported
    
    $
    (0.26
    )Adjusted
    
    $
    (0.30
    )
  2008
    
    2007
    
    20061Employee stock options:Volatility
    
    
    46.2
    %
    
    
    42.7
    %
    
    
    41.9
    %Risk-free interest rate
    
    
    3.0
    %
    
    
    4.7
    %
    
    
    4.3
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected life (years)
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Fair value per option
    
    $
    1.15
    
    
    $
    1.67
    
    
    $
    1.52Employee Stock Purchase Plan:Volatility
    
    
    68.6
    %
    
    
    39.2
    %
    
    
    38.1
    %Risk-free interest rate
    
    
    2.5
    %
    
    
    5.1
    %
    
    
    4.4
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected life (years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Fair value per option
    
    $
    1.12
    
    
    $
    1.10
    
    
    $
    1.20
 
 1
    
     Assumptions used in the calculation of fair value according to the provisions of SFAS No. 123. 72




---



##### Table of Contents



Stock Options.
 Number of
    
    
    Weighted-Averageshares
    
    
    Exercise PriceOutstanding, May 31, 2005
    
    
    63,359
    
    
    $
    5.83Granted
    
    
    21,974
    
    
    
    4.22Exercised
    
    
    (5,467
    )
    
    
    2.07Canceled
    
    
    (18,445
    )
    
    
    5.83Outstanding, May 31, 2006
    
    
    61,421
    
    
    
    5.71Granted
    
    
    24,285
    
    
    
    4.71Exercised
    
    
    (2,527
    )
    
    
    3.00Canceled
    
    
    (30,899
    )
    
    
    5.94Outstanding, May 31, 2007
    
    
    52,280
    
    
    
    5.23Granted
    
    
    6,362
    
    
    
    2.95Exercised
    
    
    (1,823
    )
    
    
    2.11Canceled
    
    
    (12,894
    )
    
    
    5.41Outstanding, May 31, 2008
    
    
    43,925
    
    
    $
    4.98
    Weighted-Weighted-
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Option
    
    Contractual
    
    Intrinsic ValueShares
    
    Price
    
    Life (in years)
    
    (in thousands)Vested and expected to vest at May 31, 2008
    
    
    38,562,756
    
    
    $
    5.18
    
    
    
    3.32
    
    
    $
    2,805
 73




---



##### Table of Contents



Restricted
Stock Awards.
 Number of
    
    
    Weighted-Shares
    
    
    Average Grant-(unvested)
    
    
    Date Fair ValueOutstanding, May 31, 2005
    
    
    1,737
    
    
    
    4.32Granted
    
    
    2,419
    
    
    
    3.84Exercised
    
    
    (854
    )
    
    
    4.07Forfeited
    
    
    (1,185
    )
    
    
    3.96Outstanding, May 31, 2006
    
    
    2,117
    
    
    
    4.07Granted
    
    
    2,380
    
    
    
    4.45Exercised
    
    
    (1,151
    )
    
    
    4.13Forfeited
    
    
    (943
    )
    
    
    4.30Outstanding, May 31, 2007
    
    
    2,403
    
    
    
    4.33Granted
    
    
    3,740
    
    
    
    2.88Exercised
    
    
    (1,051
    )
    
    
    4.33Forfeited
    
    
    (1,997
    )
    
    
    3.02Outstanding, May 31, 2008
    
    
    3,095
    
    
    $
    3.43
  Restricted
Stock Units.
 Number ofShares(unvested)Outstanding June 1, 2006
    
    
    Granted
    
    
    4,356Vested
    
    
    (836
    )Forfeited
    
    
    (409
    )Outstanding May 31, 2007
    
    
    3,111Granted
    
    
    5,738Vested
    
    
    (2,181
    )Forfeited
    
    
    (924
    )Outstanding
May 31, 2008
    
    
    5,744
  2003
Stock Plan Description.
  Employee Stock Purchase Plan.
 74




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##### Table of Contents



Stock Reserved for Issuance.
 Stock option and restricted stock plans for granted shares
    
    
    49,669Stock option and restricted stock plans for future grants
    
    
    11,500Employee stock purchase plan
    
    
    1,711Total shares reserved for issuance
    
    
    62,880
 Preferred Shares Rights Plan.
 Note 15: Financial Instruments
  (in thousands)
    
    May 31, 2008
    
    May 31, 2007Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair ValueCash and equivalents
    
    $
    503,644
    
    
    $
    503,644
    
    
    $
    559,217
    
    
    $
    559,217Corporate equity securities
    
    
    
    
    
    
    
    
    
    
    467
    
    
    
    467
  Cash and equivalents
 Corporate equity securities.
 Foreign exchange contracts.
 75




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##### Table of Contents



Note 16: Interest (expense) and Other Income, Net
  Years Ended May 31,2008
    
    
    2007
    
    
    2006Interest income
    
    $
    2,683
    
    
    $
    41,310
    
    
    $
    29,297Interest expense
    
    
    (15,770
    )
    
    
    (447
    )
    
    
    (212
    )Interest (expense) income, net
    
    $
    (13,087
    )
    
    $
    40,863
    
    
    $
    29,085Other income, net
    
    $
    44,364
    
    
    $
    38,291
    
    
    $
    8,235
  Note 17: Income Taxes
  Years Ended May 31,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    (189
    )
    
    
    530
    
    
    
    200Foreign
    
    
    3,231
    
    
    
    19,640
    
    
    
    (14,421
    )Total current
    
    
    3,042
    
    
    
    20,170
    
    
    
    (14,221
    )DeferredFederal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (5,945
    )
    
    
    (9,997
    )
    
    
    (612
    )Total deferred
    
    
    (5,945
    )
    
    
    (9,997
    )
    
    
    (612
    )Total
    
    $
    (2,903
    )
    
    $
    10,173
    
    
    $
    (14,833
    )
 76




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##### Table of Contents



May 31, 2008
    
    
    May 31, 2007Gross deferred tax assets:Operating loss carryforwards
    
    $
    1,061,779
    
    
    $
    1,003,569Amortization and depreciation
    
    
    40,722
    
    
    
    33,478Tax credit carryforwards
    
    
    55,708
    
    
    
    55,618Capital loss carryforwards
    
    
    13,541
    
    
    
    25,828Reserves recognized in different periods for tax purposes
    
    
    64,413
    
    
    
    Royalty and purchased research and development
    
    
    3,639
    
    
    
    3,639Other
    
    
    577
    
    
    
    1,270Gross deferred tax assets
    
    
    1,240,379
    
    
    
    1,123,402Gross deferred tax liabilities:Reserves recognized in different periods for tax purposes
    
    
    
    
    
    
    (144,486
    )Acquired intangibles
    
    
    (38,427
    )
    
    
    (59,115
    )Gross deferred tax liabilities
    
    
    (38,427
    )
    
    
    (203,601
    )Valuation allowance
    
    
    (1,210,771
    )
    
    
    (937,075
    )Net deferred tax liability
    
    $
    (8,819
    )
    
    $
    (17,274
    )
    77




---



##### Table of Contents



Years Ended May 31,2008
    
    
    2007
    
    
    2006Tax computed at federal statutory rate
    
    
    (35.0
    )%
    
    
    (35.0
    )%
    
    
    (35.0
    )%State income taxes, net of federal effect
    
    
    (0.6
    )
    
    
    17.1
    
    
    
    (2.1
    )Provision for combined foreign and U.S.
taxes on certain foreign income at rates
greater than U.S. rates
    
    
    (6.8
    )
    
    
    31.7
    
    
    
    15.2H3C
revaluation of deferred assets and liabilities
    
    
    2.6
    
    
    
    
    
    
    
    Valuation allowance
    
    
    15.7
    
    
    
    (3.1
    )
    
    
    24.1Goodwill impairment
    
    
    23.9
    
    
    
    
    
    
    
    Income tax benefit arising from
settlement of foreign tax audit
    
    
    
    
    
    
    
    
    
    
    (19.9
    )Non-deductible purchased in-process
technology and merger-related charges
    
    
    (0.3
    )
    
    
    7.0
    
    
    
    3.2Other
    
    
    (0.8
    )
    
    
    1.8
    
    
    
    1.7Total
    
    
    (1.3
    )%
    
    
    19.5
    %
    
    
    (12.8
    )%
    Unrecognized
benefits as of June 1, 2008
    
    $
    31,536Increases related to tax positions in prior periods
    
    
    896Decreases related to tax positions in prior periods
    
    
    (3,469
    )Increases related to tax positions taken in the current period
    
    
    3,804Settlements with tax authorities
    
    
    (13,866
    )Lapses of statute of limitations
    
    
    (765
    )Unrecognized
benefits as of May 31, 2008
    
    $
    18,136
    78




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##### Table of Contents



Note 18: Net Loss per Share
  Years Ended May 31,2008
    
    
    2007
    
    
    2006Net loss
    
    $
    (228,841
    )
    
    $
    (88,589
    )
    
    $
    (100,675
    )Weighted-average shares  Basic
    
    
    399,524
    
    
    
    393,894
    
    
    
    386,801Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    
    
    
    
    Restricted stock
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares  Diluted
    
    
    399,524
    
    
    
    393,894
    
    
    
    386,801Net loss per
share  Basic and Diluted
Net loss
    
    $
    (0.57
    )
    
    $
    (0.22
    )
    
    $
    (0.26
    )
  79




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##### Table of Contents



Note 19: Segment Information
    May 31, 2008Tipping
    
    
    
    
    
    
    
    
    
    Eliminations/(in thousands)
    
    H3C
    
    DVBU
    
    Point
    
    Corporate
    
    
    
    
    
    Other
    
    
    
    
    
    TotalSales
    
    $
    772,313
    
    
    $
    551,012
    
    
    $
    104,101
    
    
    $
    
    
    
    
    
    
    
    $
    (132,547
    )
    
    
    a
    
    
    $
    1,294,879Gross profit
    
    
    425,394
    
    
    
    172,384
    
    
    
    70,197
    
    
    
    (210
    )
    
    
    
    
    
    
    (13,310
    )
    
    
    c
    
    
    
    654,455Operating expense
    
    
    283,383
    
    
    
    198,198
    
    
    
    70,693
    
    
    
    45,878
    
    
    
    b
    
    
    
    319,784
    
    
    
    d,e
    
    
    
    917,936Operating income
(loss)
    
    $
    142,011
    
    
    $
    (25,814
    )
    
    $
    (496
    )
    
    $
    (46,088
    )
    
    
    
    
    
    $
    (333,094
    )
    
    
    
    
    
    $
    (263,481
    )
 May 31, 2007Tipping
    
    
    
    
    
    
    
    
    
    Eliminations/(in thousands)
    
    H3C
    
    DVBU
    
    Point
    
    Corporate
    
    
    
    
    
    Other
    
    
    
    
    
    TotalSales
    
    $
    731,131
    
    
    $
    552,640
    
    
    $
    90,178
    
    
    $
    
    
    
    
    
    
    
    $
    (106,468
    )
    
    
    a
    
    
    $
    1,267,481Gross profit
    
    
    344,987
    
    
    
    181,713
    
    
    
    60,307
    
    
    
    (1,196
    )
    
    
    b
    
    
    
    (7,357
    )
    
    
    c
    
    
    
    578,454Operating expense
    
    
    240,085
    
    
    
    204,003
    
    
    
    70,750
    
    
    
    44,254
    
    
    
    b
    
    
    
    151,883
    
    
    
    d,e
    
    
    
    710,975Operating income
(loss)
    
    $
    104,902
    
    
    $
    (22,290
    )
    
    $
    (10,443
    )
    
    $
    (45,450
    )
    
    
    
    
    
    $
    (159,240
    )
    
    
    
    
    
    $
    (132,521
    )
 May 31, 2006Tipping
    
    
    
    
    
    
    
    
    
    
    Eliminations/(in thousands)
    
    H3C
    
    
    DVBU
    
    
    Point
    
    
    Corporate
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalSales
    
    $
    108,290
    
    
    $
    634,294
    
    
    $
    71,045
    
    
    $
    
    
    
    
    
    
    
    $
    (18,822
    )
    
    
    
    
    
    $
    794,807Gross profit
    
    
    51,437
    
    
    
    226,452
    
    
    
    50,175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    328,064Operating expense
    
    
    30,204
    
    
    
    288,027
    
    
    
    66,122
    
    
    
    56,046
    
    
    
    b
    
    
    
    44,768
    
    
    
    d,e
    
    
    
    485,167Operating income
(loss)
    
    $
    21,233
    
    
    $
    (61,575
    )
    
    $
    (15,947
    )
    
    $
    (56,046
    )
    
    
    
    
    
    $
    (44,768
    )
    
    
    
    
    
    $
    (157,103
    )
 
 a
    
    Represents eliminations for
inter-company revenue during the respective periods. We recognize
sales between our segments on the basis of cost plus a reasonable
profit. 80




---



##### Table of Contents



b
    
    Represents costs not directly attributable to any operating business segment.c
    
    Includes stock based compensation in all periods plus purchase accounting inventory related
adjustments as applicable.d
    
    Includes amortization and restructuring in all periods and stock-based compensation,
acquisition related expenses, and goodwill impairment, as applicable.e
    
    Contained in eliminations and other for all years
presented are; restructuring expenses that relate to both the DVBU
and Corporate segments, as we do not allocate restructuring between
the segments in our CODM reporting, as well as amortization expenses
that relate to the H3C, Tipping Point and DVBU segments where
applicable. Contained in eliminations and other in fiscal 2008 is a
goodwill impairment charge that relates to the TippingPoint segment,
that was recorded in the fourth quarter. Identifiable assets
    
    2008
    
    
    2007(in thousands)H3C
    
    $
    1,276,832
    
    
    $
    1,394,199DVBU/Corporate (1)
    
    
    908,944
    
    
    
    1,014,577TippingPoint
    
    
    231,277
    
    
    
    393,637Eliminations
    
    
    (641,923
    )
    
    
    (651,321
    )Total
    
    $
    1,775,130
    
    
    $
    2,151,092
 
 (1)
    
    3Com reviews assets based on the total of our DVBU and Corporate segments and does not
allocate between the two. Total expenditures for additions to property, equipment
    
    2008
    
    
    2007(in thousands)H3C
    
    $
    8,191
    
    
    $
    16,645DVBU/Corporate (1)
    
    
    6,448
    
    
    
    6,142TippingPoint
    
    
    3,254
    
    
    
    5,544Total
    
    $
    17,893
    
    
    $
    28,331
 
 (1)
    
    3Com reviews total expenditures for additions to property, plant and equipment based on
the total of our DVBU and Corporate segments and does not allocate between the two.  Years Ended May 31,2008
    
    
    2007
    
    
    2006Networking
    
    $
    1,058,465
    
    
    
    81.7
    %
    
    $
    1,028,090
    
    
    
    81.1
    %
    
    $
    577,038
    
    
    
    72.6
    %Security
    
    
    133,445
    
    
    
    10.3
    
    
    
    120,053
    
    
    
    9.5
    
    
    
    88,012
    
    
    
    11.1Voice
    
    
    60,696
    
    
    
    4.7
    
    
    
    68,033
    
    
    
    5.4
    
    
    
    56,632
    
    
    
    7.1Services
    
    
    39,583
    
    
    
    3.1
    
    
    
    35,871
    
    
    
    2.8
    
    
    
    33,357
    
    
    
    4.2Legacy connectivity products
    
    
    2,690
    
    
    
    0.2
    
    
    
    15,434
    
    
    
    1.2
    
    
    
    39,768
    
    
    
    5.0Total
    
    $
    1,294,879
    
    
    
    
    
    
    $
    1,267,481
    
    
    
    
    
    
    $
    794,807
  Years Ended May 31,Customer
    
    2008
    
    2007
    
    2006Huawei Technologies Co.
    
    
    17
    %
    
    
    20
    %
    
    
    4
    %Ingram Micro, Inc.
    
    
    10
    %
    
    
    11
    %
    
    
    19
    %Tech Data (1)
    

    


    
    *
        
    
    *

    
    
    11
    %Total
    
    
    27
    %
    
    
    31
    %
    
    
    34
    %
 
 
 (1)
    
        Customer did not meet the 10 percent threshold in fiscal 2008 and 2007  81




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##### Table of Contents



Note 20: Geographical Information
  Years Ended May 31,Sales
    
    2008
    
    
    2007
    
    
    2006China
    
    $
    609,498
    
    
    $
    587,044
    
    
    $
    84,170Europe, Middle East, and Africa
    
    
    292,339
    
    
    
    272,826
    
    
    
    298,545North America
    
    
    202,205
    
    
    
    233,691
    
    
    
    248,532Asia Pacific excluding China
    
    
    106,820
    
    
    
    103,501
    
    
    
    91,396Latin and South America
    
    
    84,017
    
    
    
    70,419
    
    
    
    72,164Total
    
    $
    1,294,879
    
    
    $
    1,267,481
    
    
    $
    794,807
    May 31,
    
    
    May 31,2008
    
    
    2007Property and equipment, net:United States
    
    $
    22,022
    
    
    $
    30,104United Kingdom
    
    
    8,008
    
    
    
    7,843China
    
    
    20,436
    
    
    
    32,070Other
    
    
    3,848
    
    
    
    6,443Total
    
    $
    54,314
    
    
    $
    76,460
  Note 21: Employee Benefit Plan and EARP
  82




---



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Note 22: Litigation
  In re Initial Public Offering Securities Litigation, Brian Levey vs.
TippingPoint Technologies, Inc., et al.
 83




---



##### Table of Contents



Note 23: Purchased Technology License Impairment Charge
  Note 24: Quarterly Results of Operations (Unaudited)
 Fiscal 2008
    
    Fiscal 2007First
    
    Second
    
    Third
    
    Fourth
    
    First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(In thousands, except per share data)Sales
    
    $
    319,434
    
    
    $
    317,801
    
    
    $
    336,390
    
    
    $
    321,254
    
    
    $
    300,144
    
    
    $
    332,976
    
    
    $
    323,441
    
    
    $
    310,920Gross profit
    
    
    148,936
    
    
    
    152,120
    
    
    
    179,674
    
    
    
    173,725
    
    
    
    136,429
    
    
    
    150,151
    
    
    
    153,437
    
    
    
    138,437Gross profit margin %
    
    
    46.6
    %
    
    
    47.9
    %
    
    
    53.4
    %
    
    
    54.1
    %
    
    
    45.5
    %
    
    
    45.1
    %
    
    
    47.4
    %
    
    
    44.5
    %Operating loss
    
    
    (25,687
    )
    
    
    (41,331
    )
    
    
    (6,066
    )
    
    
    (190,397
    )
    
    
    (20,868
    )
    
    
    (9,380
    )
    
    
    (8,935
    )
    
    
    (93,338
    )Net loss
    
    
    (18,654
    )
    
    
    (35,624
    )
    
    
    (7,840
    )
    
    
    (166,723
    )
    
    
    (14,068
    )
    
    
    (3,516
    )
    
    
    (4,779
    )
    
    
    (66,226
    )Basic and diluted loss per share
    
    $
    (0.05
    )
    
    $
    (0.09
    )
    
    $
    (0.02
    )
    
    $
    (0.41
    )
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.17
    )
 84




---



##### Table of Contents



Note 25: Subsequent Event
   85




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation
of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal Control-Integrated Framework
  (1)
    
    pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect our transactions and dispositions of our
assets;(2)
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and board of directors; and(3)
    
    provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on our financial statements.
    86




---



##### Table of Contents



Important Considerations
  87




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    Internal
ControlIntegrated Framework
 Share-Based Payment
  
 88




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 (a) Directors
  (b) Executive Officers
  (c) Section 16(a) Beneficial Ownership Reporting Compliance
  (d) Code of Ethics
 http://www.3com.com http://www.3com.com
 (e) Corporate Governance
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  89




---



##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a
    )(1)
    
    Financial Statements  See Index to Consolidated Financial Statements and
Financial Statement Schedule at page 50 of this Form 10-K.(2)
    
    Financial Statement Schedule  See Financial Statement Schedule at page 98 of
this Form 10-K.(3)
    
    Exhibits  See Exhibit Index at page 91 of this Form 10-K.
 (b)
    
    See Exhibit Index at page 91 of this Form 10-K.(c)
    
    See Index to Consolidated Financial Statements and Financial Statement Schedule at page
53 of this Form 10-K.
 
 EXHIBIT INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith2.1
    
    Master Separation and Distribution
Agreement between the Registrant and Palm,
Inc. effective as of December 13, 1999
    
    10-Q
    
    002-92053
    
    
    2.1
    
    
    4/4/002.2
    
    Indemnification and Insurance Matters
Agreement between the Registrant and Palm,
Inc.
    
    10-Q
    
    002-92053
    
    
    2.11
    
    
    4/4/002.3
    
    Agreement and Plan of Merger, dated
December 13, 2004, by and among the
Registrant, Topaz Acquisition Corporation
and TippingPoint Technologies, Inc.
    
    8-K
    
    000-12867
    
    
    2.1
    
    
    12/16/042.4
    
    Securities Purchase Agreement by and among
3Com Corporation, 3Com Technologies, Huawei
Technologies Co., Ltd. and Shenzhen Huawei
Investment & Holding Co., Ltd., dated as of
October 28, 2005
    
    8-K/A
    
    000-12867
    
    
    2.1
    
    
    3/30/062.5
    
    Stock Purchase Agreement by and between
Shenzhen Huawei Investment & Holding Co.,
Ltd. and 3Com Technologies, dated as of
December 22, 2006
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    12/27/062.6
    
    Agreement and Plan of Merger by and among
Diamond II Holdings, Inc., Diamond II
Acquisition Corp. and 3Com Corporation,
dated as of September 28, 2007
    
    8-K/A
    
    000-12867
    
    
    2.1
    
    
    9/28/073.1
    
    Corrected Certificate of Merger filed to
correct an error in the Certificate of
Merger
    
    10-Q
    
    002-92053
    
    
    3.4
    
    
    10/8/993.2
    
    Registrants Bylaws, as amended on March
23, 2005
    
    8-K
    
    000-12867
    
    
    3.1
    
    
    3/28/053.3
    
    Certificate of Designation of Rights,
Preferences and Privileges of Series A
Participating Preferred Stock
    
    10-Q
    
    000-12867
    
    
    3.6
    
    
    10/11/01
 90




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith4.1
    
    Third Amended and Restated Preferred Shares
Rights Agreement, dated as of November 4,
2002 (Rights Plan)
    
    8-A/A
    
    000-12867
    
    
    4.1
    
    
    11/27/024.2
    
    Amendment No. 1 to Rights Plan, dated as of
September 28, 2007
    
    8-K/A
    
    000-12867
    
    
    4.1
    
    
    9/28/0710.1
    
    3Com Corporation 1983 Stock Option Plan, as
amended and restated effective September
30, 2001*
    
    10-Q
    
    000-12867
    
    
    10.1
    
    
    1/11/0210.2
    
    3Com Corporation 1984 Employee Stock
Purchase Plan, amended and restated as of
June 18, 2008 (subject to shareholder
approval)*
    
    
    
    
    
    
    
    
    
    
    
    X10.3
    
    3Com Corporation Director Stock Option
Plan, as amended*
    
    10-Q
    
    000-12867
    
    
    10.4
    
    
    10/10/0310.4
    
    3Com Corporation Restricted Stock Plan, as
amended July 1, 2001*
    
    10-K
    
    000-12867
    
    
    10.6
    
    
    8/2/0210.5
    
    3Com Corporation 1994 Stock Option Plan, as
amended and restated effective April 30,
2002*
    
    10-K
    
    000-12867
    
    
    10.7
    
    
    8/2/0210.6
    
    3Com Corporation 2003 Stock Plan, as
amended*
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    10/3/0510.7
    
    Stand Alone Stock Option Agreement dated
January 25, 2006 by and between R. Scott
Murray and 3Com Corporation *
    
    10-Q
    
    000-12867
    
    
    10.8
    
    
    4/10/0610.8
    
    Stand Alone Stock Option Agreement dated
September 5, 2006 by and between Edgar
Masri and 3Com Corporation *
    
    10-Q
    
    000-12867
    
    
    10.2
    
    
    10/10/0610.9
    
    Stand Alone Stock Option Agreement dated
July 3, 2007 by and between Jay Zager and
3Com Corporation *
    
    S-8
    
    333-144322
    
    
    10.2
    
    
    7/3/0710.10
    
    Stand Alone Restricted Stock Agreement
dated July 3, 2007 by and between Jay Zager
and 3Com Corporation *
    
    S-8
    
    333-144322
    
    
    10.3
    
    
    7/3/0710.11
    
    Form of Stock Option Agreement for 2003
Stock Plan (Non-Employee Directors)
    
    10-K
    
    000-12867
    
    
    10.7
    
    
    8/5/0510.12
    
    Form of Stock Option Agreement for 2003
Stock Plan (Employees)*
    
    10-K
    
    000-12867
    
    
    10.8
    
    
    8/5/0510.13
    
    Form of Performance Accelerated Vesting
Restricted Stock Agreement*
    
    10-K
    
    000-12867
    
    
    10.9
    
    
    8/5/0510.14
    
    Form of Performance Vesting Restricted
Stock Agreement*
    
    10-Q
    
    000-12867
    
    
    10.6
    
    
    4/10/0610.15
    
    Form of Restricted Stock Grant Agreement -
Standard 4-Year Vesting*
    
    10-K
    
    000-12867
    
    
    10.10
    
    
    8/5/0510.16
    
    Form of Restricted Stock Agreement
(Time-Based Vesting)*
    
    8-K
    
    000-12867
    
    
    10.2
    
    
    11/17/0510.17
    
    Form of Restricted Stock Unit Grant Award
Agreement*
    
    10-Q
    
    000-12867
    
    
    10.3
    
    
    10/10/0610.18
    
    R. Scott Murray Employment Agreement,
amended and restated as of February 2,
2006, between the registrant and R. Scott
Murray *
    
    8-K/A
    
    000-12867
    
    
    10.1
    
    
    2/6/0610.19
    
    Performance Vesting Restricted Stock
Agreement dated January 25, 2006 by and
between R. Scott Murray and 3Com
Corporation *
    
    10-Q
    
    000-12867
    
    
    10.7
    
    
    4/10/0610.20
    
    Edgar Masri Employment Agreement, dated as
of August 8, 2007, between the registrant
and Edgar 
Masri *
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    8/9/06
 91




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.21
    
    Employment Agreement, effective as of March
29, 2007, between H3C and Shusheng Zheng*
    
    10-K
    
    000-12867
    
    
    10.21
    
    
    7/31/0710.22
    
    Offer Letter dated May 9, 2007 between the
Registrant and Jay Zager*
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    5/10/0710.23
    
    Offer Letter dated June 19, 2004 between
the Registrant and Donald M, Halsted III*
    
    10-K
    
    000-12867
    
    
    10.16
    
    
    8/11/0610.24
    
    Offer Letter dated September 12, 2003
between the Registrant and Neal D. Goldman*
    
    10-K
    
    000-12867
    
    
    10.17
    
    
    8/11/0610.25
    
    Offer Letter dated November 2, 2005 between
the Registrant and Marc Willebeek-LeMair*
    
    10-K
    
    000-12867
    
    
    10.18
    
    
    8/11/0610.26
    
    Offer Letter dated April 11, 2006 between
the Registrant and Robert Dechant*
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    4/17/0610.27
    
    Offer Letter dated November 2, 2005 between
the Registrant and James Hamilton*
    
    10-K
    
    000-12867
    
    
    10.27
    
    
    7/31/0710.28
    
    Severance Benefits Agreement dated February
28, 2007, between the Registrant and James
Hamilton*
    
    10-K
    
    000-12867
    
    
    10.28
    
    
    7/31/0710.29
    
    Robert Y. L. Mao Employment Agreement,
dated as of August 7, 2006, between the
registrant and Robert Y. L. Mao*
    
    10-K
    
    000-12867
    
    
    10.29
    
    
    7/31/0710.30
    
    Robert Y. L. Mao Employment Agreement dated
as of April 29, 2008, between the
registrant and Robert Y. L. Mao*
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    4/30/0810.31
    
    Ronald A. Sege Employment Agreement dated
as of April 29, 2008, between the
registrant and Ronald A. Sege *
    
    8-K
    
    000-12867
    
    
    10.2
    
    
    4/30/0810.32
    
    Stand Alone Stock Option Agreement dated
May 6, 2008 by and between Ronald A. Sege
and 3Com Corporation *
    
    
    
    
    
    
    
    
    
    
    
    X10.33
    
    Stand Alone Restricted Stock Agreement
dated May 6, 2008 by and between Ronald A.
Sege and 3Com Corporation *
    
    
    
    
    
    
    
    
    
    
    
    X10.34
    
    Summary of Equity Appreciation Rights Plan
(H3C Technologies)*
    
    10-K
    
    000-12867
    
    
    10.31
    
    
    7/31/0710.35
    
    3Com Corporation Section 16 Officer
Severance Plan, amended and restated
effective September 11, 2006 *
    
    10-Q
    
    000-12867
    
    
    10.3
    
    
    1/09/0710.36
    
    Above Grade Severance Plan effective
September 11, 2006 *
    
    10-K
    
    000-12867
    
    
    10.33
    
    
    7/31/0710.37
    
    Form of Severance Benefits Agreement
between the Registrant and each of the
officers or former officers named in our
proxy statement (other than Messrs. Mao,
Sege. Masri and Murray)*
    
    8-K
    
    000-12867
    
    
    10.3
    
    
    4/4/0610.38
    
    Form of Management Retention Agreement
between the Registrant and each of the
following officers or former officers named
in our proxy statement: Messrs. Goldman,
Halsted, Hamilton and Willebeek-LeMair*
    
    10-K
    
    000-12867
    
    
    10.15
    
    
    8/5/05
 92




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.39
    
    Form of Management Retention Agreement
between the Registrant and the following
officers or former officers named in our
proxy statements: Messrs. Dechant, Zheng
and Zager and future executive officers
other than Messrs. Mao, Sege, Masri and
Murray*
    
    10-K
    
    000-12867
    
    
    10.36
    
    
    7/31/0710.40
    
    3Com Corporation Deferred Compensation Plan*
    
    10-K
    
    000-12867
    
    
    10.23
    
    
    8/9/0410.41
    
    Form of Indemnity Agreement between the
Registrant and its officers and directors
    
    S-3/A
    
    333-102591
    
    
    10.1
    
    
    4/9/0310.42
    
    Office Lease, dated as of November 26,
2002, by and between Marlborough Campus
Limited Partnership and the Registrant
    
    10-K
    
    000-12867
    
    
    10.20
    
    
    8/9/0410.43
    
    First Amendment to Lease, dated as of
November 26, 2002, by and between
Marlborough Campus Limited Partnership and
the Registrant
    
    10-K
    
    000-12867
    
    
    10.17
    
    
    8/5/0510.44
    
    Second Amendment to Lease, dated as of July
18, 2005, by and between 3Com Corporation
and Marlborough Campus Limited Partnership
    
    10-Q
    
    000-12867
    
    
    10.2
    
    
    4/5/0510.45
    
    Third Amendment to Lease, dated as of July
18, 2005, by and between 3Com Corporation
and Marlborough Campus Limited Partnership
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    7/22/0510.46
    
    Fourth Amendment to Lease dated as of
December 12, 2005 by and between
Marlborough Campus Limited Partnership and
3Com Corporation
    
    10-Q
    
    000-12867
    
    
    10.1
    
    
    1/09/0710.47
    
    Fifth Amendment to Lease dated as of
October 27, 2006 by and between Bel
Marlborough I LLC and 3Com Corporation
    
    10-Q
    
    000-12867
    
    
    10.2
    
    
    1/09/0710.48
    
    Agreement for the Lease of Hangzhou Real
Property between Huawei Technologies Co.
Ltd. and Hangzhou Huawei-3Com Technology
Co., Ltd. dated January 1, 2004
    
    10-Q
    
    000-12867
    
    
    10.7
    
    
    10/10/0610.49
    
    Shareholders Agreement by and among
Shenzhen Huawei Investment & Holding Co.
Ltd., 3Com Technologies and Huawei-3Com
Co., Ltd. (the Shareholders Agreement)
dated as of November 15, 2003 (Certain
Portions Omitted; Confidential Treatment
Requested)
    
    10-K
    
    000-12867
    
    
    10.33
    
    
    8/11/0610.50
    
    Amendment No. 1 to the Shareholders
Agreement dated as of July 31, 2004
(Certain Potions Omitted; Confidential
Treatment Requested)
    
    10-K
    
    000-12867
    
    
    10.34
    
    
    8/11/0610.51
    
    Amendment No. 2 to the Shareholders
Agreement dated as of January 27, 2006
(Certain Portions Omitted; Confidential
Treatment Requested)
    
    10-K
    
    000-12867
    
    
    10.35
    
    
    8/11/0610.52
    
    Credit and Guaranty Agreement dated as of
March 22, 2007 among H3C Holdings Limited,
as Borrower, 3Com Corporation, 3Com
Holdings Limited and 3Com Technologies, as
Holdco Guarantors, various Lenders, Goldman
Sachs Credit Partners L.P., as Mandated
Lead Arranger, Bookrunner, Administrative
Agent and Syndication Agent, and Industrial
and Commercial Bank of China (Asia)
Limited, as Collateral Agent
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    3/23/07
 93




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.53
    
    Amended and Restated Credit and Guaranty
Agreement dated as of May 25, 2007 and
effective as of May 31, 2007 among H3C
Holdings Limited, as Borrower, 3Com
Corporation, 3Com Holdings Limited and 3Com
Technologies, as Holdco Guarantors, H3C
Technologies Co., Limited, as Guarantor,
various Lenders, Goldman Sachs Credit
Partners L.P., as Mandated Lead Arranger,
Bookrunner, Administrative Agent and
Syndication Agent, and Industrial and
Commercial Bank of China (Asia) Limited, as
Collateral Agent (the A&R Credit
Agreement)
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    5/25/0710.54
    
    First Amendment to A&R Credit Agreement,
dated as of June 18, 2008
    
    
    
    
    
    
    
    
    
    
    
    X10.55
    
    Borrower Share Charge dated March 22, 2007
among 3Com Technologies, as Chargor, and
Industrial and Commercial Bank of China
(Asia) Limited, as Collateral Agent
    
    10-K
    
    000-12867
    
    
    10.53
    
    
    7/31/0710.56
    
    Borrower Fixed and Floating Charge dated
March 22, 2007 among H3C Holdings Limited,
as Chargor, and Industrial and Commercial
Bank of China (Asia) Limited, as Collateral
Agent
    
    10-K
    
    000-12867
    
    
    10.54
    
    
    7/31/0710.57
    
    Borrower Charge Over Bank Accounts dated
March 22, 2007 among H3C Holdings Limited,
as Chargor, and Industrial and Commercial
Bank of China (Asia) Limited, as Collateral
Agent
    
    10-K
    
    000-12867
    
    
    10.55
    
    
    7/31/0710.58
    
    H3C Fixed and Floating Charge dated April
3, 2007 among Huawei-3Com Co., Limited, as
Chargor, and Industrial and Commercial Bank
of China (Asia) Limited, as Collateral
Agent
    
    10-K
    
    000-12867
    
    
    10.56
    
    
    7/31/0710.59
    
    H3C Share Mortgage dated March 30, 2007
among H3C Holdings Limited, as Mortgagor,
and Industrial and Commercial Bank of China
(Asia) Limited, as Collateral Agent
    
    10-K
    
    000-12867
    
    
    10.57
    
    
    7/31/0710.60
    
    H3C Equitable Share Charge dated March 29,
2007 among 3Com Technologies, as Chargor,
and Industrial and Commercial Bank of China
(Asia) Limited, as Collateral Agent
    
    10-K
    
    000-12867
    
    
    10.58
    
    
    7/31/0710.61
    
    Deed of Charge in relation to the 100%
equity interests in WFOE dated April 3,
2007 among Huawei-3Com Co., Limited, as
Chargor, and Industrial and Commercial Bank
of China (Asia) Limited, as Collateral
Agent
    
    10-K
    
    000-12867
    
    
    10.59
    
    
    7/31/07
 94




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.62
    
    Deed of Charge in relation to the 100%
equity interests in Queenhive dated April
3, 2007 among Huawei-3Com Co., Limited, as
Chargor, and Industrial and Commercial Bank
of China (Asia) Limited, as Collateral
Agent
    
    10-K
    
    000-12867
    
    
    10.60
    
    
    7/31/0710.63
    
    Deed of Release made March 30, 2007 by
Industrial and Commercial Bank of China
(Asia) Limited, as Collateral Agent, in
favour of 3Com Technologies
    
    10-K
    
    000-12867
    
    
    10.61
    
    
    7/31/0710.64
    
    Purchase and Sale Agreement made as of July
24, 2006 by and between 3Com Corporation
and SSC II, L.P.
    
    8-K
    
    000-12867
    
    
    10.1
    
    
    7/26/0621.1
    
    Subsidiaries of Registrant
    
    
    
    
    
    
    
    
    
    
    
    X23.1
    
    Consent of Independent Registered Public
Accounting Firm  Deloitte & Touche LLP
    
    
    
    
    
    
    
    
    
    
    
    X31.1
    
    Certification of Principal Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Principal Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of Chief Executive Officer
and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
    
    
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    Indicates a management contract or compensatory plan or arrangement 95




---



##### Table of Contents



SIGNATURES
 Pursuant to the requirements of Section 13 or 15(d) 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, on the 25 th day of July, 2008.
 3COM CORPORATION
(Registrant)By
    
    /s/ Robert Y. L. MaoRobert Y. L. MaoChief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on the
25 th day of July, 2008
 Signature
    
    TitleChief Executive Officer/s/
    
    ROBERT Y. L. MAO
    
    and Director(Robert Y. L. Mao)
    
    (Principal Executive Officer)Executive Vice President,/s/
    
    JAY ZAGER
    
    Chief Financial Officer(Jay Zager)
    
    (Principal Financial and Accounting Officer)/s/
    
    ERIC A. BENHAMOU
    
    Chairman of the Board(Eric A. Benhamou)/s/
    
    GARY T. DICAMILLO
    
    Director(Gary T. DiCamillo)Director(James R. Long)Director(Raj Reddy)/s/
    
    RONALD A. SEGE
    
    President and Chief Operating Officer and Director(Ronald A. Sege)/s/
    
    DOMINIQUE TREMPONT
    
    Director(Dominique Trempont)
 96




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##### Table of Contents



AdditionsBalance at
    
    Charged
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    to Costs and
    
    
    
    
    
    
    
    
    
    End ofDescription
    
    Period
    
    Expenses
    
    Other
    
    Deductions
    
    PeriodYear ended May 31, 2006:Allowance for doubtful accounts
    
    $
    15,090
    
    
    $
    1,000
    
    
    $
    165
    (2)
    
    $
    (167
    )(1)
    
    $
    16,422Allowance for product returns
    
    
    5,052
    
    
    
    15,288
    
    
    
    6,768
    (2)
    
    
    18,416
    
    
    
    8,692Accrued product warranty
    
    
    41,782
    
    
    
    28,424
    
    
    
    4,543
    (2)
    
    
    32,958
    
    
    
    41,791Year ended May 31, 2007:Allowance for doubtful accounts
    
    
    16,422
    
    
    $
    (586
    )
    
    $
    
    
    
    $
    544
    (1)
    
    $
    15,292Allowance for product returns
    
    
    8,692
    
    
    
    13,963
    
    
    
    
    
    
    
    16,614
    
    
    
    6,041Accrued product warranty
    
    
    41,791
    
    
    
    46,406
    
    
    
    
    
    
    
    47,601
    
    
    
    40,596Year ended May 31, 2008:Allowance for doubtful accounts
    
    
    15,292
    
    
    $
    (2,234
    )
    
    $
    
    
    
    $
    805
    (1)
    
    $
    12,253Allowance for product returns
    
    
    6,041
    
    
    
    12,965
    
    
    
    
    
    
    
    14,388
    
    
    
    4,618Accrued product warranty
    
    
    40,596
    
    
    
    33,989
    
    
    
    
    
    
    
    37,688
    
    
    
    36,897
 
 (1)
    
    Accounts written off  net of recoveries(2)
    
    Represents reserves related to the H3C acquisition 97




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith2.1
    
    Master Separation and Distribution
    
    10-Q
    
    002-92053
    
    2.1
    
    4/4/00Agreement between the Registrant and Palm,Inc. effective as of December 13, 19992.2
    
    Indemnification and Insurance Matters
    
    10-Q
    
    002-92053
    
    2.11
    
    4/4/00Agreement between the Registrant and Palm,Inc.2.3
    
    Agreement and Plan of Merger, dated
    
    8-K
    
    000-12867
    
    2.1
    
    12/16/04December 13, 2004, by and among theRegistrant, Topaz Acquisition Corporationand TippingPoint Technologies, Inc.2.4
    
    Securities Purchase Agreement by and among
    
    8-K/A
    
    000-12867
    
    2.1
    
    3/30/063Com Corporation, 3Com Technologies, HuaweiTechnologies Co., Ltd. and Shenzhen HuaweiInvestment & Holding Co., Ltd., dated as ofOctober 28, 20052.5
    
    Stock Purchase Agreement by and between
    
    8-K
    
    000-12867
    
    10.1
    
    12/27/06Shenzhen Huawei Investment & Holding Co.,Ltd. and 3Com Technologies, dated as ofDecember 22, 20062.6
    
    Agreement and Plan of Merger by and among
    
    8-K/A
    
    000-12867
    
    2.1
    
    9/28/07Diamond II Holdings, Inc., Diamond IIAcquisition Corp. and 3Com Corporation,dated as of September 28, 20073.1
    
    Corrected Certificate of Merger filed to
    
    10-Q
    
    002-92053
    
    3.4
    
    10/8/99correct an error in the Certificate ofMerger3.2
    
    Registrants Bylaws, as amended on March
    
    8-K
    
    000-12867
    
    3.1
    
    3/28/0523, 20053.3
    
    Certificate of Designation of Rights,
    
    10-Q
    
    000-12867
    
    3.6
    
    10/11/01Preferences and Privileges of Series AParticipating Preferred Stock4.1
    
    Third Amended and Restated Preferred Shares
    
    8-A/A
    
    000-12867
    
    4.1
    
    11/27/02Rights Agreement, dated as of November 4,2002 (Rights Plan)4.2
    
    Amendment No. 1 to Rights Plan, dated as of
    
    8-K/A
    
    000-12867
    
    4.1
    
    9/28/07September 28, 200710.1
    
    3Com Corporation 1983 Stock Option Plan, as
    
    10-Q
    
    000-12867
    
    10.1
    
    1/11/02amended and restated effective September30, 2001*10.2
    
    3Com Corporation 1984 Employee Stock
    
    
    
    
    
    
    
    
    
    XPurchase Plan, amended and restated as ofJune 18, 2008 (subject to shareholderapproval)*10.3
    
    3Com Corporation Director Stock Option
    
    10-Q
    
    000-12867
    
    10.4
    
    10/10/03Plan, as amended*10.4
    
    3Com Corporation Restricted Stock Plan, as
    
    10-K
    
    000-12867
    
    10.6
    
    8/2/02amended July 1, 2001*10.5
    
    3Com Corporation 1994 Stock Option Plan, as
    
    10-K
    
    000-12867
    
    10.7
    
    8/2/02amended and restated effective April 30,2002*10.6
    
    3Com Corporation 2003 Stock Plan, as
    
    8-K
    
    000-12867
    
    10.1
    
    10/3/05amended*
 98




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.7
    
    Stand Alone Stock Option Agreement dated
    
    10-Q
    
    000-12867
    
    10.8
    
    4/10/06January 25, 2006 by and between R. ScottMurray and 3Com Corporation *10.8
    
    Stand Alone Stock Option Agreement dated
    
    10-Q
    
    000-12867
    
    10.2
    
    10/10/06September 5, 2006 by and between EdgarMasri and 3Com Corporation *10.9
    
    Stand Alone Stock Option Agreement dated
    
    S-8
    
    333-144322
    
    10.2
    
    7/3/07July 3, 2007 by and between Jay Zager and3Com Corporation *10.10
    
    Stand Alone Restricted Stock Agreement
    
    S-8
    
    333-144322
    
    10.3
    
    7/3/07dated July 3, 2007 by and between Jay Zagerand 3Com Corporation *10.11
    
    Form of Stock Option Agreement for 2003
    
    10-K
    
    000-12867
    
    10.7
    
    8/5/05Stock Plan (Non-Employee Directors)10.12
    
    Form of Stock Option Agreement for 2003
    
    10-K
    
    000-12867
    
    10.8
    
    8/5/05Stock Plan (Employees)*10.13
    
    Form of Performance Accelerated Vesting
    
    10-K
    
    000-12867
    
    10.9
    
    8/5/05Restricted Stock Agreement*10.14
    
    Form of Performance Vesting Restricted
    
    10-Q
    
    000-12867
    
    10.6
    
    4/10/06Stock Agreement*10.15
    
    Form of Restricted Stock Grant Agreement -
    
    10-K
    
    000-12867
    
    10.10
    
    8/5/05Standard 4-Year Vesting*10.16
    
    Form of Restricted Stock Agreement
    
    8-K
    
    000-12867
    
    10.2
    
    11/17/05(Time-Based Vesting)*10.17
    
    Form of Restricted Stock Unit Grant Award
    
    10-Q
    
    000-12867
    
    10.3
    
    10/10/06Agreement*10.18
    
    R. Scott Murray Employment Agreement,
    
    8-K/A
    
    000-12867
    
    10.1
    
    2/6/06amended and restated as of February 2,2006, between the registrant and R. ScottMurray *10.19
    
    Performance Vesting Restricted Stock
    
    10-Q
    
    000-12867
    
    10.7
    
    4/10/06Agreement dated January 25, 2006 by andbetween R. Scott Murray and 3ComCorporation *10.20
    
    Edgar Masri Employment Agreement, dated as
    
    8-K
    
    000-12867
    
    10.1
    
    8/9/06of August 8, 2007, between the registrantand Edgar Masri *10.21
    
    Employment Agreement, effective as of March
    
    10-K
    
    000-12867
    
    10.21
    
    7/31/0729, 2007, between H3C and Shusheng Zheng*10.22
    
    Offer Letter dated May 9, 2007 between the
    
    8-K
    
    000-12867
    
    10.1
    
    5/10/07Registrant and Jay Zager*10.23
    
    Offer Letter dated June 19, 2004 between
    
    10-K
    
    000-12867
    
    10.16
    
    8/11/06the Registrant and Donald M, Halsted III*10.24
    
    Offer Letter dated September 12, 2003
    
    10-K
    
    000-12867
    
    10.17
    
    8/11/06between the Registrant and Neal D. Goldman*10.25
    
    Offer Letter dated November 2, 2005 between
    
    10-K
    
    000-12867
    
    10.18
    
    8/11/06the Registrant and Marc Willebeek-LeMair*10.26
    
    Offer Letter dated April 11, 2006 between
    
    8-K
    
    000-12867
    
    10.1
    
    4/17/06the Registrant and Robert Dechant*10.27
    
    Offer Letter dated November 2, 2005 between
    
    10-K
    
    000-12867
    
    10.27
    
    7/31/07the Registrant and James Hamilton*10.28
    
    Severance Benefits Agreement dated February
    
    10-K
    
    000-12867
    
    10.28
    
    7/31/0728, 2007, between the Registrant and JamesHamilton*
 99




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.29
    
    Robert Y. L. Mao Employment Agreement,
    
    10-K
    
    000-12867
    
    10.29
    
    7/31/07dated as of August 7, 2006, between theregistrant and Robert Y. L. Mao*10.30
    
    Robert Y. L. Mao Employment Agreement dated
    
    8-K
    
    000-12867
    
    10.1
    
    4/30/08as of April 29, 2008, between theregistrant and Robert Y. L. Mao*10.31
    
    Ronald A. Sege Employment Agreement dated
    
    8-K
    
    000-12867
    
    10.2
    
    4/30/08as of April 29, 2008, between theregistrant and Ronald A. Sege *10.32
    
    Stand Alone Stock Option Agreement dated
    
    
    
    
    
    
    
    
    
    XMay 6, 2008 by and between Ronald A. Segeand 3Com Corporation *10.33
    
    Stand Alone Restricted Stock Agreement
    
    
    
    
    
    
    
    
    
    Xdated May 6, 2008 by and between Ronald A.Sege and 3Com Corporation *10.34
    
    Summary of Equity Appreciation Rights Plan
    
    10-K
    
    000-12867
    
    10.31
    
    7/31/07(H3C Technologies)*10.35
    
    3Com Corporation Section 16 Officer
    
    10-Q
    
    000-12867
    
    10.3
    
    1/09/07Severance Plan, amended and restatedeffective September 11, 2006 *10.36
    
    Above Grade Severance Plan effective
    
    10-K
    
    000-12867
    
    10.33
    
    7/31/07September 11, 2006 *10.37
    
    Form of Severance Benefits Agreement
    
    8-K
    
    000-12867
    
    10.3
    
    4/4/06between the Registrant and each of theofficers or former officers named in ourproxy statement (other than Messrs. Mao,Sege. Masri and Murray)*10.38
    
    Form of Management Retention Agreement
    
    10-K
    
    000-12867
    
    10.15
    
    8/5/05between the Registrant and each of thefollowing officers or former officers namedin our proxy statement:  Messrs. Goldman,Halsted, Hamilton and Willebeek-LeMair*10.39
    
    Form of Management Retention Agreement
    
    10-K
    
    000-12867
    
    10.36
    
    7/31/07between the Registrant and the followingofficers or former officers named in ourproxy statements:  Messrs. Dechant, Zhengand Zager and future executive officersother than Messrs. Mao, Sege, Masri andMurray*10.40
    
    3Com Corporation Deferred Compensation Plan*
    
    10-K
    
    000-12867
    
    10.23
    
    8/9/0410.41
    
    Form of Indemnity Agreement between the
    
    S-3/A
    
    333-102591
    
    10.1
    
    4/9/03Registrant and its officers and directors10.42
    
    Office Lease, dated as of November 26,
    
    10-K
    
    000-12867
    
    10.20
    
    8/9/042002, by and between Marlborough CampusLimited Partnership and the Registrant10.43
    
    First Amendment to Lease, dated as of
    
    10-K
    
    000-12867
    
    10.17
    
    8/5/05November 26, 2002, by and betweenMarlborough Campus Limited Partnership andthe Registrant10.44
    
    Second Amendment to Lease, dated as of July
    
    10-Q
    
    000-12867
    
    10.2
    
    4/5/0518, 2005, by and between 3Com Corporationand Marlborough Campus Limited Partnership10.45
    
    Third Amendment to Lease, dated as of July
    
    8-K
    
    000-12867
    
    10.1
    
    7/22/0518, 2005, by and between 3Com Corporationand Marlborough Campus Limited Partnership
 100




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.46
    
    Fourth Amendment to Lease dated as of
    
    10-Q
    
    000-12867
    
    10.1
    
    1/09/07December 12, 2005 by and betweenMarlborough Campus Limited Partnership and3Com Corporation10.47
    
    Fifth Amendment to Lease dated as of
    
    10-Q
    
    000-12867
    
    10.2
    
    1/09/07October 27, 2006 by and between BelMarlborough I LLC and 3Com Corporation10.48
    
    Agreement for the Lease of Hangzhou Real
    
    10-Q
    
    000-12867
    
    10.7
    
    10/10/06Property between Huawei Technologies Co.Ltd. and Hangzhou Huawei-3Com TechnologyCo., Ltd. dated January 1, 200410.49
    
    Shareholders Agreement by and among
    
    10-K
    
    000-12867
    
    10.33
    
    8/11/06Shenzhen Huawei Investment & Holding Co.Ltd., 3Com Technologies and Huawei-3ComCo., Ltd. (the
Shareholders Agreement)dated as of November 15, 2003 (CertainPortions Omitted; Confidential TreatmentRequested)10.50
    
    Amendment No. 1 to the Shareholders
    
    10-K
    
    000-12867
    
    10.34
    
    8/11/06Agreement dated as of July 31, 2004(Certain Potions Omitted; ConfidentialTreatment Requested)10.51
    
    Amendment No. 2 to the Shareholders
    
    10-K
    
    000-12867
    
    10.35
    
    8/11/06Agreement dated as of January 27, 2006(Certain Portions Omitted; ConfidentialTreatment Requested)10.52
    
    Credit and Guaranty Agreement dated as of
    
    8-K
    
    000-12867
    
    10.1
    
    3/23/07March 22, 2007 among H3C Holdings Limited,as Borrower, 3Com Corporation, 3ComHoldings Limited and 3Com Technologies, asHoldco Guarantors, various Lenders, GoldmanSachs Credit Partners L.P., as MandatedLead Arranger, Bookrunner, AdministrativeAgent and Syndication Agent, and Industrialand Commercial Bank of China (Asia)Limited, as Collateral Agent10.53
    
    Amended and Restated Credit and Guaranty
    
    8-K
    
    000-12867
    
    10.1
    
    5/25/07Agreement dated as of May 25, 2007 andeffective as of May 31, 2007 among H3CHoldings Limited, as Borrower, 3ComCorporation, 3Com Holdings Limited and 3ComTechnologies, as Holdco Guarantors, H3CTechnologies Co., Limited, as Guarantor,various Lenders, Goldman Sachs CreditPartners L.P., as Mandated Lead Arranger,Bookrunner, Administrative Agent andSyndication Agent, and Industrial andCommercial Bank of China (Asia) Limited, asCollateral Agent (the A&R CreditAgreement)10.54
    
    First Amendment to A&R Credit Agreement,
    
    
    
    
    
    
    
    
    
    Xdated as of June 18, 200810.55
    
    Borrower Share Charge dated March 22, 2007
    
    10-K
    
    000-12867
    
    10.53
    
    7/31/07among 3Com Technologies, as Chargor, andIndustrial and Commercial Bank of China(Asia) Limited, as Collateral Agent
 101




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##### Table of Contents



Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.56
    
    Borrower Fixed and Floating Charge dated
    
    10-K
    
    000-12867
    
    10.54
    
    7/31/07March 22, 2007 among H3C Holdings Limited,as Chargor, and Industrial and CommercialBank of China (Asia) Limited, as CollateralAgent10.57
    
    Borrower Charge Over Bank Accounts dated
    
    10-K
    
    000-12867
    
    10.55
    
    7/31/07March 22, 2007 among H3C Holdings Limited,as Chargor, and Industrial and CommercialBank of China (Asia) Limited, as CollateralAgent10.58
    
    H3C Fixed and Floating Charge dated April
    
    10-K
    
    000-12867
    
    10.56
    
    7/31/073, 2007 among Huawei-3Com Co., Limited, asChargor, and Industrial and Commercial Bankof China (Asia) Limited, as CollateralAgent10.59
    
    H3C Share Mortgage dated March 30, 2007
    
    10-K
    
    000-12867
    
    10.57
    
    7/31/07among H3C Holdings Limited, as Mortgagor,and Industrial and Commercial Bank of China(Asia) Limited, as Collateral Agent10.60
    
    H3C Equitable Share Charge dated March 29,
    
    10-K
    
    000-12867
    
    10.58
    
    7/31/072007 among 3Com Technologies, as Chargor,and Industrial and Commercial Bank of China(Asia) Limited, as Collateral Agent10.61
    
    Deed of Charge in relation to the 100%
    
    10-K
    
    000-12867
    
    10.59
    
    7/31/07equity interests in WFOE dated April 3,2007 among Huawei-3Com Co., Limited, asChargor, and Industrial and Commercial Bankof China (Asia) Limited, as CollateralAgent10.62
    
    Deed of Charge in relation to the 100%
    
    10-K
    
    000-12867
    
    10.60
    
    7/31/07equity interests in Queenhive dated April3, 2007 among Huawei-3Com Co., Limited, asChargor, and Industrial and Commercial Bankof China (Asia) Limited, as CollateralAgent10.63
    
    Deed of Release made March 30, 2007 by
    
    10-K
    
    000-12867
    
    10.61
    
    7/31/07Industrial and Commercial Bank of China(Asia) Limited, as Collateral Agent, infavour of 3Com Technologies10.64
    
    Purchase and Sale Agreement made as of July
    
    8-K
    
    000-12867
    
    10.1
    
    7/26/0624, 2006 by and between 3Com Corporationand SSC II, L.P.21.1
    
    Subsidiaries of Registrant
    
    
    
    
    
    
    
    
    
    X23.1
    
    Consent of Independent Registered Public
    
    
    
    
    
    
    
    
    
    XAccounting Firm - Deloitte & Touche LLP31.1
    
    Certification of Principal Executive Officer
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Principal Financial Officer
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of Chief Executive Officer
    
    
    
    
    
    
    
    
    
    Xand Chief Financial Officer pursuant to 18U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of2002
 
 *
    
    Indicates a management contract or compensatory plan or arrangement 102