Eric Benhamou this month announced he will step down as CEO of 3Com Corp. in a move that could be seen as the end to a year-long, tumultuous restructuring campaign.
Benhamou, 45, who has led 3Com the past 10 years, will step down on Jan. 1, when Bruce Claflin, 48, 3Com’s current president and chief operating officer, will take over as CEO.
Benhamou’s departure comes as 3Com completes a major restructuring program aimed at improving profitability by focusing on high-growth areas. Among the changes, 3Com has exited the large corporate LAN/WAN and analog modem businesses and has let go of the first of an expected 2,000 to 3,000 employees. The company also spun off its Palm division, which has become a highly successful venture in only a few months.
As chairman, Benhamou will work with Claflin to guide the company in its business strategy and technology direction. He also plans to become more active in trying to influence IT policy and the direction of the IT industry.
Days before Benhamou’s announcement last week, the company released its first-quarter financial results, reporting a net loss of US$41.3 million, or 12 U.S. cents per share, on sales of US$933.3 million. That beat the expectations of analysts, who had predicted the firm would lose 34 U.S. cents per share. In the same quarter last year, 3Com earned US$113.7 million, or 32 U.S. cents per share, on sales of US$1.2 billion. The US$933.8 million in sales included US$127.5 million from the exited analog modem and LAN/WAN high-end chassis businesses. Excluding those sales, 3Com recorded sales of US$806.3 million in the quarter, up 20 per cent from the fourth quarter.
3Com’s results were in sharp contrast with Palm Inc., which reported record revenue of US$401 million for its first fiscal quarter of 2001 – its first as a separate company from 3Com – along with a net income of US$17.3 million. Palm’s market capitalization is more than $30 billion while 3Com’s is now a little more than US$6 billion.
Benhamou’s departure comes at the right time because 3Com has almost totally reinvented itself from what it was under his leadership, said Frank Dzubeck, president of Communications Network Architects, a Washington, D.C., consulting firm.
“Now the Palm thing is over, the US Robotics thing is over . . . [3Com] is out of the [large] enterprise business . . . it’s a good time to exit, stage left. At least he’s leaving on a good note,” Dzubeck said.
As for the future of 3Com, Dzubeck sees a continuation of 3Com’s current course with Claflin at the helm – a strong focus on service providers with its CommWorks software product line and small/midsize businesses and consumers with its stackable switches, NBX telephony, OfficeConnect and home network products.
One 3Com user sees the move as positive for the vendor’s new market focus.
“As long as 3Com continues to care and feed for the edge equipment business and their LAN telephony products, I don’t see any problems,” said Walt Crosby, chief technology officer of RoweCom Inc., a Cambridge, Mass., maker of software that helps businesses buy research books, journals and periodicals on-line. Crosby uses 3Com 3300 switches in his network, and 3Com’s NBX LAN telephony system and IP phones.
As 3Com becomes more focused on service provider, Internet appliance and consumer markets, Crosby says businesses of his size (about 250 end users) are still a sweet spot for 3Com that the firm will try to improve on.
“Claflin should be able to take them forward in that direction,” he added.