3Com deal ends network venture with Siemens

3Com today said it plans to transform its network-based telephone system typically geared for small and medium-sized businesses to service large corporations and business telecommuters.

3Com and Siemens originally teamed for a $100 million joint venture in 1998 to develop telephony products for corporate networks. But the pair killed the partnership this summer after 3Com bought NBX, a company that builds telephone systems to shuttle phone traffic over data networks.

At the time, the two companies--which have an agreement to jointly sell and market each other's products--didn't rule out working together to build a similar network-based telephony system for large businesses.

With today's announcement, 3Com has decided to go it alone and build its own technology as it tries to compete against rivals such as Cisco Systems, Nortel Networks, and Lucent Technologies.

Networking and telecommunications equipment makers are all racing to build equipment that combines voice and data over a single network, even though many businesses are skeptical that the technology is reliable enough to work effectively.

Equipment makers are touting the technology as a cheaper way to route phone calls than traditional phone systems. They also say phone networks based on Internet technology can offer advanced features, like unified messaging, or the ability to check voice mail and email over a single electronic device.

For 3Com, the introduction of the new equipment is part of the struggling firm's overall strategy to rebound from its troubled times. The company has spent the past year trying to move away from slow growing markets, such as analog modems and networking cards, to emerging markets, such as Internet telephony, high-speed Internet access modems, wireless technology and home networking.

"This is important for 3Com. You've got Cisco trying to move into the voice space and Lucent and Nortel, who's strong in the voice market," said analyst Chris Nicoll of Current Analysis. "If 3Com wants to bill itself as a solution provider in the (large) business market, they have to embrace voice or they will be relegated to being a niche player."

3Com executives today said the company will build add-on voice modules that can be connected to 3Com's existing networking equipment. The company is also developing a program to entice programmers to build new applications. One goal is to allow employees to route work-related phone calls to a conference room or home office.

For example, 3Com envisions a future where people can wirelessly "beam" information from a Palm device to an Internet-based phone, feeding it user preferences or frequently dialed numbers.

"We're changing the way people use telephones," said Edgar Masri, senior vice president and general manager of 3Com's network systems' business unit. "We plan to connect (Palm devices) to telephones. You can program an office phone, home phone, or pay phone with your number and personalize its functions."

Currently, 3Com's network-based phone system, called the NBX Communications System, can support up to 200 users. By the end of the year, 3Com will add these same voice capabilities to its SuperStack II switches, which will support up to 750 users, the company said. By early 2001, the company plans to add voice to its high-end CoreBuilder 9000 switch, which will support up to about 1,000 users.

3Com later this year will also build a version of NBX for home office users, and allow telecommuters to connect to their corporate phone system through cable or digital subscriber line (DSL) connection.