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3Com keeps pace with competition

The networking gear maker announces built-in redundancy for its new high-end enterprise switch. But it has a long way to go before it will beat Cisco Systems.

3Com took another step in its quest to challenge Cisco Systems in the high-end Ethernet switching market.

On Monday, the company announced that is has added a second switch fabric card to its 7700 Ethernet switch for redundancy. This means that if a failure occurs, traffic will quickly switch over to the backup fabric without interrupting the flow of traffic. The updated version, called the 3Com Switch 7700R, is the first and only 3Com product to offer redundancy with fast failover capabilities, a standard requirement for switches used in the heart of many large corporate networks.

"This announcement by itself isn't earth-shattering," said Zeus Kerravala, an analyst with The Yankee Group. "One product won't change 3Com's standing in the market. But it is a necessary step, and it shows their commitment to the enterprise market."

The 3Com Switch 7700, which was introduced in June, is the first product to come out of the company's joint venture with Chinese manufacturer Huawei Technologies. 3Com already has spent roughly $160 million on the partnership, which is supposed to help the company get back into the high-end enterprise routing and switching market. 3Com exited the market in 2000 to focus on small to midsize businesses and consumers.

The 7700 was designed specifically to compete against Cisco's Catalyst switches. So far, it's been a slow start for 3Com. In the third quarter of 2003, the company had less than 1 percent of the chassis-based modular Ethernet market, according to research firm The Yankee Group. Cisco dominated with 60 percent. Foundry Networks was second with 10 percent, and Nortel Networks came in third with 8 percent.

3Com executives acknowledge that winning the enterprise market will be difficult. Many customers are still gun-shy when it comes to the 3Com brand, having been burned when the company quickly exited the market before. But Charles Gallagher, director of product management for 3Com's modular products, said the company is working hard to rebuild its portfolio and its reputation.

"It's down to us to show customers how serious and committed we are to this market," he said. "That will take time. We are executing on our strategy and building out business on a good base of customers."

Most companies that 3Com competes with in the high-end switching market, including Cisco, already offer redundant switch fabrics. This feature is necessary for the company to be seriously considered by most large corporate customers, especially those thinking about using voice over Internet Protocol (VoIP), analysts say.

For the moment, 3Com appears to be playing catch-up with competitors, as it continues to add standard features, such as security, to its product line. Its strategy has been to compete mainly on price. It claims to undercut Cisco by at least 25 percent.

While it may win the pricing war, it doesn't offer the same flexibility and investment protection that Cisco offers customers.

For example, Cisco's Catalyst 6500 chassis can be configured to support between 32 gigabits per second (gbps) and 720gbps of switching capacity, simply by changing supervisor engines and updating line cards. Even though customers typically pay a high premium for the upgrades, they still perceive the option as investment protection, said Joel Conover, a senior analyst with Current Analysis.

3Com is working on more upgrades for the 7700 high-end switch. But even some of its new features will lag behind the competition. For example, it plans on offering 10gbps Ethernet line cards for the 7700 later this year. But due to the current architecture of the switch, it will likely only support throughput speeds of 8gbps, Conover said.

Early 10gbps products from Cisco, Extreme Networks and Foundry Networks also were limited to 8gbps. But now these companies are on their third generation of technology that forwards packets at true 10gbps speeds.

Analysts say that 3Com will have to do more than compete on price if it hopes to beat Cisco.

"The 3Com product is based on technology that's 3 years old," Conover said. "The 3Com-Huawei combination can sell an equivalent switch for less than what Cisco sells it for, but to win market share they'll have to sell a better switch for less. And that's a tough challenge."