UPDATE 1-3Com results beat Street, shares drop on weak outlook

* Q4 adj EPS of 10 cents beat estimates by 5 cents

* Q4 rev falls 8 pct to $295.1 mln

* Sees Q1 sales of $270 mln-$280 mln

* Sees Q1 adj EPS below estimates

* Shares fall 14 percent

July 9 (Reuters) - U.S. network equipment maker 3Com Corp (COMS.O) posted a better-than-expected fourth-quarter profit, but forecast first-quarter results below Wall Street expectations, sending its shares down as much as 14 percent.

"We expect to see a decline in our first-quarter cash balance due to an anticipated $50 million payment in China for long term incentive employee payments," Chief Financial Officer Jay Zager said on a conference call with analysts.

The company forecast first-quarter earnings of 3 cents to 5 cents a share, excluding items, on revenue of $270 million to $280 million. Analysts were looking for earnings of 7 cents a share, excluding items, on revenue of $301.0 million.

It expects gross margins to be below fourth-quarter levels.

3Com reported fourth-quarter net income of $20.2 million, or 5 cents per share, compared with a net loss of $166.7 million, or 41 cents per share, a year earlier.

Excluding a $158.0 million goodwill impairment charge, its profit was 10 cents a share. Revenue fell 8.2 percent to $295.1 million.

Analysts expected earnings of 5 cents a share, excluding exceptional items, on revenue of $294.8 million, according to Reuters Estimates.

Shares of the company were trading down 11 percent at $4.20 Thursday afternoon on Nasdaq. They touched a low of $4.05 earlier in the day. (Reporting by Shrutika Verma in Bangalore; Editing by Jarshad Kakkrakandy)