3Com to reshuffle?

Having recently spun off part of its Palm operations, 3Com may have other significant restructuring plans in the works that could have a more dramatic effect on its enterprise customer base.

Sources claim 3Com may spin off pieces of its Network Systems business unit and significantly restructure other parts of the company.

The Network Systems business unit oversees development and marketing of the company's large enterprise LAN switches and remote access platforms for service providers.

Edgar Masri, senior vice president and general manager of the unit, is understood to have been meeting with consultants to discuss restructuring and reorganisation options in an attempt to keep the shareholder value momentum going after the Palm IPO spin-off.

3Com stock hovered at or below $US30 between September and November 1999. But then the stock took off in anticipation of the Palm initial public offering, reaching a high of about $US120 mid-month before dipping again to about $US68. Observers believe it will decline even more after Palm is completely spun off in six months because 3Com will be left with mostly low-growth, low-margin, price-sensitive businesses.

3Com declined to comment on reports of Masri's meetings with consultants and refused an interview on the company's next moves.

Observers speculated that another restructuring may accompany the earnings announcement. Some believe 3Com could follow the lead of Cabletron and Lucent and divest itself of some slow-growth enterprise operations.

Tere Bracco, an analyst at US-based CurrentAnalysis, in a recent report on Lucent's enterprise business divestiture, said "I think 3Com will spin off its enterprise division, but if it spins it off and gives it a new name, launches it as a different entity, I don't think it will be making the best choice," she said.

"I think 3Com has the best chance to succeed in the enterprise business. It can own the evolving enterprise with a good brand name and a sharp focus. I don't think it can own the service provider market."

Bracco said there is "Nothing I can talk about [but] I think something will be announced probably in early to mid-April."

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