3Com sold? You're joking, right?

Huawei was already in bed with 3Com, but why Bain Capital went along for this ride is a mystery.

Kudos to 3Com CEO Edgar Masri and the board for selling the company to Bain Capital and Chinese networking provider Huawei. I suppose the company will be taken private from here. We've seen this in the networking business before: Enterasys was taken private in November of 2005 for $385 million.

3Com logo

While the strategy is well-understood, I really have no idea what Bain and Huawei are thinking. You could point to the fact that 3Com did about $1.2 billion in revenue, and has global distribution in place for more product sales. You can even talk about 3Com's market share in SMB networking. Yes, the company has a few strengths, but it has also been bleeding red ink for years and has reinvented itself more times than Cher. Here in Massachusetts, lots of people I know have worked at 3Com at one time or another and generally leave the company, either by force or voluntarily, in a rather unhappy state. It's been a proverbial "house of cards" for at least 10 years.

When companies go private, investors typically cut resources, sell off assets, and fix core operations. Once this is done, they look to go public or sell the now healthy entity to another firm. The problem here is that 3Com has already made more cuts than Edward Scissorhands. At the same time, other networking vendors have greatly improved products and sewn up markets. Cisco is Cisco; Juniper kills it in the service provider market; Hewlett-Packard is winning in the SMB space; Extreme has a killer end-to-end switching architecture, etc. Other than TippingPoint, I can't recall the last time an IT executive even asked me if 3Com was still in business.

Perhaps this new 3Com team will prove me wrong and reinvent itself this time (as opposed to numerous other times) but for now, the only people who are guaranteed to make money on this deal are the investment bankers and lawyers. Oh, and the 3Com management team will also make some dough here as well for dressing up the company and finding a buyer. These few fortunate souls pale in comparison to the generations of investors and employees who long ago lost money and faith in 3Com.

Huawei was already in bed with 3Com, but why Bain went along for this ride is a mystery to me. Perhaps the Bain folks would also be interested in a certain bridge in New York City that I will gladly sell.

 

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