Networking's latest shake-up sees 3Com exit large enterprise front

The networking industry is in a state of flux again after 3Com last week became the latest company to throw in the towel on the large enterprise networking market.

The move, which comes hot on the heels of Cabletron's recent four-way split and Lucent's decision to spin off its corporate networking unit, reinforces the dominance of Cisco Systems, Nortel Networks and Alcatel at the top of the industry tree.

As revealed by Computerworld (March 20, p1), senior 3Com officials had been meeting with consultants to discuss restructuring options in an attempt to keep the shareholder value momentum going after the successful initial public offering of the company's Palm Computing spin-off.

The beleaguered networking company will sell some high-end equipment to Motorola and kill off its family of CoreBuilder high-end switching products, turning to former competitor Extreme Networks for that type of technology.

The last date for shipments of 3Com enterprise networking kit will be June 30. However, officials claimed customers of all dropped products lines would be supported for a period of up to five years.

3Com also plans to offload its troubled analog modem business. The company will take a minority stake in a joint venture with Accton Technology and manufacturing company NatSteel Electronics to build and sell analog modems that use the US Robotics name.

The partnership will be one of seven alliances for 3Com as it seeks to obtain technologies in high-growth markets.

As a result, 3Com's revenues will be halved from about $US6 billion to $US3 billion annually and the company plans to cut about 3000 jobs. About two thirds of the employees will move with the jettisoned businesses, while the remaining third will be laid off.

Yet despite the upheaval, local officials insisted 3Com would benefit in the long term.

"The corporate restructuring fits in well with the current focus of our activities in this region," Archie Wilson, managing director of 3Com Australia and New Zealand, said.

Analysts also welcomed 3Com's restructuring, a move that had been anticipated since its primary competitor, Bay Networks, was acquired by Nortel in 1998. Michael Speyer, an analyst at The Yankee Group, commented: "Some customers may be angry, some may see it as an opportunity, some may not care."

But he added: "What is important is how 3Com manages the transition."

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More about 3Com AustraliaAcctonAlcatel-LucentBay NetworksCiscoExtreme NetworksLucentMotorolaNatSteel ElectronicsNortel NetworksPalm ComputingUS RoboticsYankee Group

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