3Com-Huawei venture official

With all the red tape out of the way, 3Com Corp. announced this week that it is ready to roll forward in its joint venture operations with China-based Huawei Technologies Co.

The joint venture was announced earlier this year, but has since been awaiting government approvals to officially commence.

According to 3Com, the deal creates a new entity – Huawei-3Com Co. Ltd. – which will be responsible for delivering enterprise networking solutions including routers and LAN switches throughout China and Japan, a market 3Com has been hard-pressed to enter.

3Com Canada’s general manager, Nick Tidd, explained that the company had strict criteria in choosing a partner for the venture, and expanding into China and Japan was top on the company’s list.

“China and Japan are some of the fastest economies in the world from a growth perspective,” Tidd said. “The second criteria was that we firmly believe that the leading tier-one networking company of the future is one that is going to be driven around not only innovation and feature content, but will be able to reduce total cost of ownership.”

By working together as Huawei-3Com, the two companies say they can lower their cost of engineering and manufacturing while creating an environment whereby the organization can draw on expertise from around the world.

Tidd said Huawei had similar expectations in that the company has historically been very strong in China and needed to expand out into the North American market.

Under the Huawei-3Com brand, 3Com has the rights to market and support the new entity’s products under the 3Com brand in all countries except China and Japan, where Huawei-3Com will sell products.

In addition, Huawei is contributing its enterprise networking business assets to Huawei-3Com including LAN switches and routers, engineering and sales/marketing resources and personnel, and licenses. 3Com is contributing $160 million in cash, assets related to its operations in China and Japan, and licenses to certain intellectual property. In two years, 3Com has the right to acquire a majority ownership, the company said.

Although the joint venture primarily affects the way 3Com does business outside of North America, Tidd said customers will see a major difference.

“(Our customers) are going to see a more robust product portfolio, which will encompass all elements of enterprise networking and small- and medium-sized business networking,” he said. “Secondly, from a value proposition, the market cannot tolerate competitive margins – what other manufacturers are charging for their technology. The cost of doing business with 3Com is a greater value proposition than we see from other vendors.”

Earlier this year, Huawei-3Com announced the 3Com 7700, a seven-slot modular switching chassis that incorporates Layer 2 and Layer 3 switching functionality and supports up to 48 gigabit Ethernet ports, up to 288 Fast Ethernet ports and offers a performance of 96Gbps. The company has also since released its 3Com 3000 and 3Com 5000 family of LAN routers. [Please see 3Com takes another stab at high-end LAN market.]

“The biggest benefit to this is that it gives our customers and partners a viable alternative to what is out there in the market,” Tidd said.

For more information, visit www.3Com.com.