3Com boosts strategy for small businesses

Next week, the company plans to unveil a product strategy for small and mid-sized companies, highlighted by a new network-based telephony system that integrates voice and data. The move comes as 3Com revises its business strategy in light of recent financial woes.

Analysts said 3Com continues to capitalize on one of its classic strengths, by providing low-cost, simple-to-use networking products to small and medium-sized businesses.

3Com, simply put, is attempting to offer businesses a cheaper way to route phone calls. In the past, companies of all sizes have relied on expensive circuit-based systems from firms like Lucent Technologies and Nortel Networks. 3Com plans to take advantage of a new line of equipment that takes voice traffic and adds it to internal data-based pipes, and then apply that technology for smaller operations.

The small business market is also one often ignored by 3Com's competitors, such as Cisco Systems, said senior analyst Shannon Pleasant, of Cahners In-Stat Group.

"3Com's addressing probably the hottest growth opportunity in networking and an under-served segment of the market," Pleasant said. "Small businesses have limited budgets and limited IT support. And 3Com knows how to compete in a low-cost environment. It's got good brand recognition."

The company also plans to update its OfficeConnect modems and Ethernet switches, and will also offer free customer phone support for 90 days for products.

Although analysts agree that 3Com's telephony move is a smart one, some questioned whether the company will make money on the products immediately.

3Com in February purchased telephony startup NBX for $90 million. The technology, now called the NBX Communications System, combines voice and data over Ethernet, the dominant method used to connect PCs and server systems on a local network, or LAN.

With special phones, calls are routed over the LAN to a regular public phone system, allowing users to save money on phone calls, 3Com executives said. With the added savings, small businesses could see a more immediate return on their equipment investments, according to industry observers.

"It's important to 3Com, but it's not going to be a market phenomenon in the near future until its proven to be reliable, cost-effective, and standards are available," said Pleasant.

But Dave Passmore, research director for consulting firm NetReference, said there's potential for 3Com to sell the NBX product now, especially since it's cheaper than traditional PBX switches, an internal telephone system that connects a company's telephone extensions with an outside network.

"The folks who will buy these systems--the LAN-based call servers with Ethernet phones--will be small and mid-sized businesses," he said. "The larger ones have too much of an installed base of PBXs."

3Com recently suffered through a dismal quarter. But the addition of telephony to its business strategy may help the company's financial results in the future, analysts said.

"This might help them financially in the long term, but it won't suddenly perk up their quarter," Pleasant said.

Passmore added that while most of 3Com's products for the market are low-margin items, the NBX phone system represents a higher margin business, and can increase company revenue.

The NBX 100 Communications System--which will include unified messaging software to allow retrieval of voice mail, email, and faxes--will cost about $15,000 and will ship this month.

The OfficeConnect Switch 800 and 1600 represent updates to the company's Ethernet-based switches that offer high-speed connections between servers. The 800 switch will cost $495 and the 1600 will cost $795. Both products will be available this month.

The SuperStack II Remote Access 1500 Expansion Unit for remote Internet and intranet access costs $1,795. The Office Connect 56K LAN Modem is priced at $349, while the ISDN LAN modem costs $499. These products are available now.