Will 3Com

3Com Corp. President and CEO Bruce Claflin stopped by the office a few weeks ago to give us a company update and to emphasize that 3Com is still in the enterprise market.

Actually, Claflin says 3Com never abandoned the enterprise. Although the company gave up on its high-end LAN and WAN switches in March 2000 because of the pain associated with beating its head against a rock named Cisco, Claflin says 3Com continued to sell boatloads of stackables, NICs and VoIP products into the enterprise.

Technically, he may be correct, but when the company announced its strategic shift that March it said: “3Com will now concentrate all its resources on three distinct networking markets: consumers, commercial customers (particularly small and medium-sized locations) and network service providers.”

It’s hard to find the large enterprise in there.

Instead, 3Com went after the consumer market, buying the Kerbango Internet radio company for US$80 million in June 2000 and launching the Audrey home Web appliance that October. Five months later the company dumped the whole consumer appliance effort.

Why? Claflin says broadband didn’t grow as fast as expected, prices plummeted faster than expected and with fewer fat access pipes going into the home, the home network and appliance business didn’t materialize.

So with the bloom off the consumer rose, the enterprise returned to front and centre for 3Com. Today, the company is particularly upbeat about: Gigabit Ethernet over copper, a market it claims to lead; VoIP, where it also claims leadership share; 10/100 stackables; wireless LANs; and layer 4 switches.

But times are getting tougher. 3Com finished fiscal 2001 in June with revenue of US$2.8 billion and a net loss of almost US$1 billion. And the quarter-to-quarter picture looks bleak. Fourth-quarter sales were down 26 per cent from the third quarter to US$468 million, and quarterly losses rose from US$246 million to US$517 million in that quarter.

The company is shedding 41 per cent of its workforce, shutting two-thirds of its manufacturing space and outsourcing production of high volume items – cost savings that should shore up the balance sheet.

The question is whether buyers will forgive the strategic flip-flops. The company has a solid reputation that predates the latest gyrations, so that may see it through.

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Jim Love, Chief Content Officer, IT World Canada

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