3Com Dumps Enterprise; Users Miffed

FRAMINGHAM (03/27/2000) - 3Com Corp. stunned network users and analysts alike last week with the breadth of a restructuring that will phase out its entire big-enterprise switching business by the end of June.

The Santa Clara, California company announced that it will discontinue its CoreBuilder LAN switches and all big-iron networking gear, including its PathBuilder and NetBuilder products. 3Com said it will instead focus on more growth-oriented lines of business.

Large-scale users said they felt abandoned, and several expressed disbelief that future upgrades will be coming from a vendor they said they had never heard of.

"This was a big blow to us," said Brian Wilson, a network engineer at Ohio State University's Fisher College of Business, which built a showcase network using 3Com's CoreBuilder LAN switches.

"We invested all of this money, and now the equipment is obsolete," said Wilson.

The upgrade path for CoreBuilder users will be to a switch called BlackDiamond from Extreme Networks Inc., also in Santa Clara.

"I'm not familiar with Extreme," Wilson said.

More perplexed than upset was systems administrator Scott Ivers at pet food company Royal Canin USA in St. Louis. Ivers set up a network using 3Com's SuperStack II Ethernet switches and said he has been impressed with how easy the network is to manage. He said his next move would have been to install a CoreBuilder switch.

"Does this mean Cisco takes over?" Ivers asked. "I've never heard of Extreme."

Brian Dahill, a network support analyst at St. Luke's Hospital and Regional Trauma Center in Duluth, Minn., said he wasn't thrilled about the deal either but had heard from an Extreme representative who would be visiting the St.

Luke's site this week. "I really hate to think about changing," he said.

3Com Senior Vice President Edgar Masri said he understands that users are concerned. But he noted that CoreBuilder products have two or three years of useful life before their users will need to move to the next generation of switches. "They're certainly not obsolete," he said. Moreover, Masri said, 3Com will continue to support discontinued products for up to five years.

Masri also said the network management capabilities of the CoreBuilder 9000 would be ported to Extreme's BlackDiamond line.

Not all users were concerned. Ram Prabhu, corporate telecommunications manager at Millipore Corp. in Bedford, Mass., which uses 3Com's high-end CoreBuilder 9000 network switch, said that representatives from 3Com and Extreme had contacted him and that he didn't anticipate any major problems going forward.

Nigel Oakley, 3Com's vice president of marketing, said the firm would now focus its efforts on small to midsize business networks and home networks and advance its voice-over-IP telephone business, which enables users to send voice conversations over data lines. Like 3Com's spin-off of Palm Inc., the restructuring will allow the company to focus on markets where it sees the best growth, said Oakley.

3Com has been "largely unsuccessful" in competing with Cisco Systems Inc., Nortel Networks Corp. and even Cabletron Systems Inc. in the LAN switching market, said Esmeralda Silva, an analyst at International Data Corp. in Framingham, Mass. Last year, she said, 3Com had a 4 percent revenue share of the chassis/modular business for local-area networking, while Cisco's share was 63 percent. But 3Com has held its own in the fixed-port LAN sector, with a 25 percent revenue share, she said.

Giga Information Group Inc. analyst Stan Schatt in Cambridge, Mass., also said 3Com's restructuring is an acknowledgment that CoreBuilder was never able to crack into Cisco's market.

"The jury is still out on this," Schatt said. "It's an extremely major reorganization. One day later, 3Com is very different."

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