Commentary: 3Com stung by switch from large enterprises
3Com is blaming its troubles on structural changes in the worldwide telecommunications sector that are adversely affecting all networking products makers.
By Marina Mayes, Gartner Analyst 3Com is blaming its troubles on structural changes in the worldwide telecommunications sector that are adversely affecting all networking products makers.
But even though 3Com's competitors--including Cisco Systems and Nortel Networks--have also experienced declining demand for their network products, they are not reporting such dramatically declining revenues.
What is different about 3Com? For one thing, earlier this year, the company announced a restructuring plan that left large enterprises with the impression that 3Com is no longer interested in their business. That perception--which is only partially accurate, since the company still sells products for that market, such as chassis switches--has hurt the company's bottom line.
The company has definitely narrowed the range of its product offerings. It no longer competes in the market for big enterprise switches, concentrating instead on its home territory: switching products for small to midsize enterprises. The result is that large enterprises no longer put 3Com on their short lists when considering companies.
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3Com is moving to address at least some of those problems. The company's recent acquisition of Alteon WebSystems' Gigabit Ethernet NIC business from Nortel means it will be able to offer a line of low-cost, copper-based Ethernet NICs. That line should prove attractive to small businesses--but the results are not likely to have a positive impact on 3Com's revenue until the first quarter of 2001 at the earliest.
The bottom line is that 3Com is facing some troubling issues that must be addressed. Gartner has been predicting for some time that a consolidation is coming in the networking products industry--and 3Com might just turn out to be an acquisition target of one of its more successful competitors.
(For related commentary on Gigabit Ethernet technology, see TechRepublic.com--free registration required.)
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