3Com has a dramatic restructuring plan. At the heart is the decision to bow out of three slow-growth businesses.
The company said it will take a US$200 million to US$300 million restructuring charge as it departs the analog modem business, the core backbone networking arena in the enterprise and the WAN core market.
This transformation, in which 2,500 to 3,000 of 3Com's 13,000 worldwide workers are expected to leave the company, begs the question: Can 3Com ultimately prevail by getting smaller?
3Com will discontinue marketing its CoreBuilder 9000 and CoreBuilder 3500 high-performance campus networking switches as of June 30. The company will help customers make the transition to high-end LAN switching products from partner Extreme Networks, according to Edgar Masri, senior vice president and general manager of 3Com's business networking group.
"Extreme will take our sales people and service and support to help with the transition," Masri said. "We will maintain and expand on our SuperStack workgroup switching products and aggregation devices for small and medium-sized locations."
3Com, which at the same time will also discontinue its NetBuilder and PathBuilder WAN offerings for the enterprise, pledged to provide parts and service for the discontinued offerings for up to five years after purchase, Masri said.
Greater opportunities elsewhere
"The CoreBuilder line was showing solid performance, but the market for the large enterprise has been maturing and actually showing decline," he said. "Second, we felt continuing this heavy investment in this area would take away from appropriate investments for small to medium-sized locations, where growth rates are in the 20 percent range and where the opportunity is much higher and more in tune with our strengths."
For its PC card modem and analog desktop line, 3Com intends to form a new company with Taiwan's Accton Technology and Singapore's NatSteel Electronics, which will buy those products and market Internet access products, including 3Com's US Robotics-branded analog modems.
3Com's plan to jump-start growth is to leverage its strengths in three markets: the consumer market, the commercial networking market for small and medium-size businesses, and the carrier/ISP market, where the company has a strong presence in remote access with its Total Control server and its newer DSL and cable head-end offerings.
In addition, 3Com will bolster its service provider offerings through several deals struck with F5 Networks, Inktomi and Sonic Wall for traffic management, Web caching and security offerings.
At the same time, 3Com will also exploit the early lead it has in voice over IP to spur on growth, officials said. To that end, it has formed alliances with customer relationship management provider Appropos Technologies for LAN telephony-based call centre and customer care offerings and with Symbol Technologies to embed 3Com's NBX LAN Telephony technology into Symbol's wireless phones.
3Com also reported earnings Monday for the third quarter, ended February 25. Sales of US$1.4 billion were flat with the year-ago period. Net income was US$97.4 million, or 27 cents, up 9 percent, after excluding one-time items and results from 3Com's spun-off Palm unit.
