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3Com joins rush to network buildings for DSL

3Com plans to announce Monday a new division and new networking equipment that will allow building owners to offer high-speed Internet access to their tenants.

3Com plans to announce Monday a new division and new networking equipment that will allow owners of apartments, hotels and office buildings to offer high-speed Internet access to their tenants.

The network equipment maker plans to provide the equipment that property owners need to network their buildings, so they can offer digital subscriber line (DSL) connections and Web services, a source close to 3Com said.

3Com will also announce partnerships with technology companies and service providers who will provide building owners the ability to offer Web-based services, such as personalized Web portal sites, to their tenants, the source said.

The personalized portal sites, for example, would give apartment tenants the ability to reserve tennis courts in their apartment complex or would allow hotel guests to make dinner reservations at restaurants, the source said.

"With the few players dedicated to going after this market, what 3Com is proposing is a good strategy," Parks Associates analyst Kurt Scherf said.

3Com president Bruce Claflin and other executives are expected to announce details Monday. A 3Com representative declined to comment.

3Com is hoping to nab a piece of the U.S. multi-tenant market that is expected to grow from $371 million this year to nearly $2 billion by 2004, according to a recent study by Cahners In-Stat Group.

The move will pit 3Com against other players, such as Tut Systems, Elastic Networks and Cisco Systems, which are selling equipment that links multi-tenant buildings. Copper Mountain, a partner of 3Com, also competes in the market.

Like Tut's equipment, 3Com's new product will allow building owners to use existing phone lines to give their tenants high-speed Internet access, the source close to 3Com said.

For example, business travelers in a hotel room would be able to plug their notebook computers into a DSL modem in the room, the source said. Renters living in apartments and condos would get Internet access by plugging their computers into any phone jack in their home.

The source said Monday's announcement will include a partnership with CAIS Internet, which provides high-speed Internet access to airports and hotels, as well as in homes. 3Com recently made an investment in CAIS.

3Com's impending announcement is the latest in a series of moves to revitalize the company after more than a year of stagnant revenue growth.

Analysts say the new strategy is a smart move for 3Com, especially because some 20 million to 25 million of all U.S. households live in multi-tentant units.

Tenants and business travelers get access to high-speed Net access and new Web-based services, while building owners have another avenue to generate revenue, said Yankee Group analyst Karuna Uppal.

"It's a booming market," Uppal said. "You take a lot of older cities that are more dense, and they are underserved in telecommunications. There are a lot of new hotels equipped with more advanced capabilities, but there are many hotels on this earth that are a lot older and are not Internet-enabled."

In the past year, 3Com has spun off Palm and its slow-growing analog modem business and killed off its networking equipment arm for large businesses.

The company is focusing on emerging markets, such as high-speed modems, wireless and home networking, and Internet telephony. It is catering to small and midsized businesses and consumers in those markets, two areas the company has historically dominated.

Chase Hambrecht & Quist analyst Erik Suppiger said 3Com's newest strategy to network apartments, offices and hotels has potential, but he doesn't expect it to affect the company's bottom line for the next several quarters.

"3Com is going in a lot of different directions to gain traction," Suppiger said. "And this is totally unproven for 3Com, but they've got to go down a number of roads to get their growth back."