3Com, Siemens ditch $100m LAN telephony plan

Less than a year into the project, 3Com and Siemens have dropped their $100 million joint venture to develop LAN telephony products.

In its filing with the Securities and Exchange Commission, 3Com stated that an "expanded strategic relationship" with Siemens this year obviated the need for the joint venture.

"During fiscal 1999, we expanded our strategic relationship with Siemens AG to include a worldwide joint selling agreement in the large enterprise and solutions provider markets," the filing stated. "The strategic alliance may consider joint development of voice-related enterprise and carrier solutions. In light of the current strategic relationship, the two companies will not proceed with a previously announced joint venture."

3Com and Siemens have had a joint development and marketing relationship for more than two years. In October 1997, they announced the Carrier Scale Internetworking alliance, which also included Newbridge Networks.

The joint venture, though, was more ambitious. It was to have been co-owned and jointly staffed by Siemens and 3Com, with headquarters in the US and developers in California, Massachusetts, Germany, Israel and the UK.

The companies planned to staff the joint venture with more than 200 engineers who would have produced LAN telephony products combining 3Com's SuperStack II and CoreBuilder LAN switches with Siemen's Hicom and HiNet PBX and call processing technology.

Those products, including LAN PBXs, multimedia exchanges and gateways, would have shipped this year and into 2000.

Last March, the companies named a general manager and board members for the joint venture and said the plans for the joint venture were proceeding, even broadening.

3Com responded to requests for interviews with 3Com executives regarding the reasons for dropping the joint venture with this statement:

"Our current collaboration is sufficient to meet our goals. We will continue to work together to more efficiently develop solutions for our respective customers: Siemens for their PBX and carrier customers and 3Com for our carrier and enterprise data customers."

The statement then went on to list a few accomplishments of the 3Com/Siemens union to date. None of those accomplishments included customer wins with the LAN telephony products co-developed and/or co-marketed by the companies: the 3Com SuperStack II PBX 1000, which began shipping early this year; or the Siemens HiNet RC 3000 call processing software, which started shipping late last year.

Siemens spokespeople were not immediately available for comment.

Analysts say 3Com's $90 million purchase of packet PBX vendor NBX in March essentially killed the joint venture with Siemens.

"After they bought NBX, which was directly competitive to what supposedly Siemens and 3Com said they were going to be working on, it was like, 'Well, okay, so what is the relationship now then?'" says Craig Johnson, principal at The PITA Group in Portland, Ore. "Obviously, now what it has become is nothing."

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