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3Com president predicts company revival

After a dizzying reorganization to stem disappointing earnings, president Bruce Claflin predicts the networking company is on the verge of a revival.

After a dizzying reorganization to stem a tide of disappointing earnings, 3Com is on the verge of a revival, company president Bruce Claflin predicts.

With a year of flip-flopping strategies behind it, 3Com executives insist the company now has a sound strategy. Claflin is banking on it. He just exercised $1 million worth of 3Com stock options and is keeping the stock as an investment.

Faced with stagnant revenue growth amid an exploding networking market, 3Com two months ago announced a major reorganization intended to turn the company's fortunes around.

3Com has spun off Palm, shed its slow-growing analog modem business, and killed off its networking equipment arm for large businesses. The company now caters to small and mid-sized businesses and consumers, two markets the company has historically dominated.

The company is also selling software and equipment to service providers and focusing on emerging markets, such as high-speed modems, wireless and home networking and Internet telephony.

"A year from now, 3Com's profile will be higher growth with higher returns," Claflin said.

In an interview with CNET News.com, Claflin discussed 3Com's latest strategy, the company's future technology bets, and explained, once and for all, why the company is not for sale.

CNET News.com: Now that you've reorganized, what is 3Com?
It's a networking company targeted at three markets: consumers, commercial and carriers.

What distinguishes us is our technology is rich and simple. Networking is too complex. This is a problem because we target consumers and small and Bruce Claflin medium-sized locations. We need to build products in a way they can buy, install, manage and use it with no technical capabilities whatsoever.

It's like "great taste, less filling." Our whole thing is "rich function, but simplicity."

3Com has long been rumored to be an acquisition candidate. Are you open to being acquired?
No. We believe we have all the attributes needed to run as an independent company--the cash, technology, people and brand. We believe the best way to create shareholder value is to run it the way we're attempting to run it.

This is more than just theoretical. When we made the decision to spin off Palm, one of the byproducts we needed was a tax-free ruling, which we received. If a change of ownership occurs within two years, the acquirer will have to pay a tax bill for Palm.

I wouldn't say we couldn't be sold, but the tax burden would be so prohibitive that it's unlikely. We think this is fine because we don't intend to be sold.

How do telecommunications carriers and Internet service providers fit in to your strategy?
We have a business that targets carriers. We have the infrastructure and technology that allows carriers to deliver new Internet-based services to businesses.

In addition, we will sell these services to small and mid-sized business locations and consumers. As part of our (latest) announcements, we've been really pushing the idea of 'let's take these services to market together.'