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3Com looks to ride e-business bandwagon

After struggling with a series of strategic changes and business shifts, 3Com now aims to take advantage of the boom for e-business.

3Com has decided it will try to take advantage of the e-business boom, after struggling with a series of strategic changes and business shifts.

Company executives today touted their networking equipment as the technology large businesses need to connect customers, partners, and workers to the Web. At a users' conference in Chicago, 3Com augmented the new strategy with plans for products that will ease network congestion, speed up Web access, and support voice, video, and data on a single Internet-based network.

See related newsmaker: Eric Benhamou The new push, analysts say, matches 3Com's desire to return to its networking roots. Yet the company has faltered in the face of stiff competition from the likes of Cisco Systems and Nortel Networks, along with a slew of start-ups including Foundry Networks and Extreme Networks.

3Com has long dominated many portions of the low-end of the networking market, but struggled to form a strategy for high-end corporate customers and communications companies.

Recently, the firm bounced between different business goals. Chief executive Eric Benhamou said just this spring that 3Com's popular Palm Computing device was central to the company's overall business strategy. In September, however, he switched gears and said the struggling firm would spin off its Palm unit to focus on its core networking business.

"The basic message is pretty simple," Benhamou said in a press conference today. "Before you can do anything e-related, whether it's e-widgets, e-pony, e-textiles, or e-pants, you need an 'e-network' from 3Com."

Yet analysts say 3Com has jumped on the e-business bandwagon for financial reasons. Investors love the Internet, and dozens of companies have profited from this boom.

"It looks like they're trying to leverage the success of other companies who have talked about building the Internet infrastructure, and it looks like e-networks is 3Com's first steps into that new positioning," said Mike McConnell, analyst with technology consultants Infonetics Research.

Some say 3Com's Internet push may help raise its profile among existing or potential customers.

"It helps them convey a more concise strategy. The one frustrating point for people who follow 3Com's story is that they've changed their message over the past few years," said Christin Armacost, equities analyst with Tucker Anthony Cleary Gull. "This is the first time we've heard a consistent strategy laid out."

Switching gears
3Com today announced plans to support voice in an upcoming version of its CoreBuilder 9000 switch, and will offer gigabit-speed Ethernet capabilities in its SuperStack switching device and network interface cards. Gigabit Ethernet is high-speed networking technology that allows PCs and other devices to connect on a network.

3Com also licensed technology from IP Highway to build "policy-based" features into its network management software. Policy-based management software allows network managers to set aside enough bandwidth for important applications. For example, companies can give priority to human resources software over email messages.

All products will ship next year.

"It's more of a marketing announcement, trying to get people to think about 3Com's viability and competitiveness in its product line," Armacost said. "It shows customers their technology roadmap for existing products, plants the seed in the customers' minds on emerging technologies, and that 3Com will play a critical role."

3Com has been making the transistion from slow growth markets, like its analog modem business, to emerging markets, such as Internet telephony, wireless, and home networking technology. But while the company pushes into new areas, Armacost said sales of networking equipment to corporations will remain important as it represents half of the company's total revenue.

"In terms of long-term strategy, competitive systems products are vital for 3Com to remain competitive against Cisco, Nortel, and Cabletron," she said.