Global Forum: 3Com to become e-networks supplier

January's planned spin-off of Palm Computing should not only enable 3Com Corp to refocus its operations squarely on the networking technology arena, but also to evangelise the concept of intelligent networks, 3Com's chief executive said.

In Shanghai for the Fortune Global Forum, Eric Benhamou, chairman and chief executive officer of 3Com yesterday, in an interview with IDG News Service, talked about intelligent networks, Palm's expanding focus and one of his key concerns: the fall in research and development (R&D) investment in the US and worldwide.

Benhamou also came up with a new tagline for 3Com's business going forward: "We create e-networks for e-businesses."

IDGNS: What is the impact of the Palm spin-off on 3Com?

Eric Benhamou (EB): It recentres 3Com very clearly in the networking business. There was a danger that 3Com was being seen purely as the maker of Palm. We're becoming principally a networking company again.

The strategy we'll deliver on will be user-centric networking. The new generation of networks will become sufficiently smart and flexible enough to adapt to the requirements of every individual user. We're the first company to admit that our industry has treated every user the same -- being able to receive and send bits is not terribly sophisticated. The expectation is that the network changes in terms of who the user is, what they do, and reflects the general policies assigned to the user by their network administrator.

We will deliver on the [intelligent network] concept in the commercial, enterprise and carrier markets. We intend to differentiate ourselves from the pack by being simple to use and reliable, along with facilitating convergence. Most players tend to be focused on features and performance,Our CommWorks architecture illustrates all the[(intelligent network] concepts in a carrier-oriented offering. The largest carriers are deploying it in areas of voice over IP (Internet Protocol), fax-over-IP and unified messaging.

We have all the pieces in place today for intelligent networks. There are no holes, we have all technologies we need. We have more patents in this field than any other company.

We do expect to make some acquisitions. Our balance sheet has never been stronger. We had $US400 million in cash in our last quarter. Six months ago, our acquisition of NBX was along the same lines. NBX is an early pioneer of LAN (local area network) telephony that we have integrated into our product line.

IDGNS: So, where next for Palm as it heads for an initial public offering?

EB: Our ambitions go far beyond the device itself. Areas include the licensing of the software, particularly to companies making smart mobile phones, like Nokia, Alcatel and Ericsson. We have an opportunity to proliferate the OS. Three years from now, there will be more Palm OS copies than Windows. Licensing Palm OS to games manufacturers is another area we're currently interested in. We'll announce many large licensees soon.

Palm is not perfect, but it's one cut above anything else that has been done. We defined the category. The category was basically nonexistent before Palm. Our rule is to never violate the Zen of Palm, what defines the Palm experience.

IDGNS: Any comments on Palm's recent lawsuit against Olivetti Office USA Inc?

EB: It's a clear case of a company stealing software and reproducing it in a device (the Royal daVinci handheld personal digital assistant) without bothering to remove 3Com and Palm's copyright statement. That's in your face behaviour and we just won't stand for it.

One of the greatest dangers in the IT society is if you can't protect your intellectual property rights. It reduces the incentive to create intellectual property. The lawsuit was a case of theft and piracy. It went fast. The lawsuit was filed and the company asked to stop selling its device at once.

IDGNS: Why still no Chinese version of the Palm OS?

EB: We thought about this and the Japanese market is more mature for devices. The Japanese invented the advanced consumer device market and they love small, cuddly things. We can't do everything this year. We're very focused on expanding Palm's geographic focus, with Spanish, Italian, German and French versions of the Palm OS as well as Japanese. We will have a Chinese version next year.

IDGNS: What are your feelings about the Chinese market and the local government's moves towards opening its markets up to foreign investment?

EB: China is a very strong market for us. I told our Shanghai team this week that I value a dollar's revenue from China more than a dollar's revenue from any other country.

In government policy, you can always find places to criticise, but my attitude is that the glass is half full. All the changes are in the right direction. Things are definitely looking up and we certainly welcome a successful conclusion to WTO (World Trade Organisation) discussions. That will launch China into an unstoppable path towards the common standards accepted by international community. That's certainly our hope, and progress is being made.

IDGNS: Earlier this week here, you mentioned your concerns about R&D investment, both in the US and the rest of the world. Can you elaborate on these concerns?

EB: Our great IT industry was borne of fundamental breakthrough research in the 1960s and 1970s, which resulted in packet switching, LANs (local area networks), and what we now know as the internet. Our industry has done a very good job turning that breakthrough research into products, improving upon it year after year. But the amount of fundamental research done today in the world is less than 20 years ago.

We are lulling ourselves into a false sense of security that the [IT] industry will keep supplying the breakthrough research. People are not paid or rewarded for fundamental research cutting across multiple disciplines shared across companies. One area where there needs to be fundamental groundbreaking research is in the area of user interfaces. The user interface we are accustomed to is WIMP (Windows, interface, mouse, pointing device) which Xerox invented in the mid-1970s. I was one of the early users of the Altos computer [which was never released for retail] at Xerox. My experience today on the G3 Mac Powerbook is basically the same as the Altos other than speed, there have been no fundamental new concepts. We need to go to SILK (sound, image, language, knowledge-based) interfaces.

Looking at [US] federally sponsored IT research, 10 years ago we had the balancing budget religion and cutting the R&D budget was easiest. I'm on US President Bill Clinton's Information Technology Advisory Committee, and over the last two years all the leading [US] agencies, including the Department of Defense and the Department of Energy, are trying to understand how to carry out research.

Research projects in the US are fragmented and it's hard to do any crosscut across agencies, even though multidisciplines are required across multiple users. Research done across single disciplines and in single year chunks won't get solved.

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