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IBM, 3Com expand Net gear alliance

The companies expand an existing marketing and development alliance to accelerate the delivery of high-end ATM-based networking technology.

    IBM (IBM) and 3Com (COMS) announced several enhancements to their ongoing working relationship today, each company shoring up the technology shortcomings of the other.

    The new deal will round out each of the companies product lines in two networking technology areas: Ethernet at 10- to 1,000-mbps speeds, a mainstay in most connected workgroups, and ATM (asynchronous transfer mode), a high-speed pipe often used to tie multiple buildings in a campus or multiple sites over the wide area to each other.

    The two giants have previously partnered to jointly develop an IBM switch line called the 8260. The new relationship gives IBM's gear an increased role in LANs (local area network) tied to ATM and offers 3Com an opportunity to expand its presence in the ATM market and as a networking player in the wide area.

    "It just continues to expand 3Com's push into IBM's sandbox," said Craig Johnson, principal analyst for market watcher Current Analysis. "It gives 3Com access to potentially larger network sites and gives IBM some pieces they really need."

    Under terms of the new agreement, IBM and 3Com will trade technologies to ramp up their respective high-end Ethernet-to-ATM switch offerings. 3Com also promises to market IBM's Multiprotocol Switching Services (MSS) internetworking software for ATM-based network environments, tying LAN-based ATM protocols to WAN-based protocols. IBM will also resell 3Com's SuperStack II gear and add ATM uplinks to that popular 3Com workgroup Ethernet-based switch line.

    Big Blue will also gain Fast Ethernet and Gigabit Ethernet functionality from 3Com in future modules for IBM's 8260 switch platform, leveraging 3Com's expertise in the technology, according to IBM officials.

    Most of the technology will roll out next year, according to company officials, though 3Com's Gigabit Ethernet gear is supposed to hit the market by the end of this year.

    "The new paradigm in this space is co-opetition," observed Esmerelda Silva, analyst with International Data Corporation. "Sometimes the best way is to partner rather than go it alone."

    Ron Sege, 3Com's vice president for its enterprise systems business, said the new arrangement could add $500 million in revenue to company coffers over the next five years. That figure echoes the amount 3Com officials said was achievable through a recently announced partnership with Siemens.

    IBM currently resells 3Com networking hardware products stemming from a relationship Big Blue had with Chipcom, a company 3Com acquired in 1995. Since that time, IBM has also developed partnerships with LAN (local area network) switching player Xylan and Cascade Communications, which was recently acquired by Ascend Communications.

    An expanded partnership with 3Com could potentially spell trouble for Xylan, in particular, a company that has been hurt financially by sluggish sales of its product through IBM's sales channels but could use the IBM machine to expand its presence in corporate networks.

    Xylan officials were forced to pre-release preliminary earnings because of a revenue shortfall related to IBM sales, among other reasons. Total sales still came in at over $45 million for the quarter, with income totaling over $7 million, a significant jump for the company.

    "It can't help the relationship, let's put it that way," said Johnson.

    IBM officials said they would soon clarify their other partners' roles, but they noted that the company still spends 80 percent of its research and development dollars on internally developed networking technologies, rather than third-party integration.

    "We are going for a balanced approach," said Rick McGee, IBM's vice president of strategy and business development for its networking hardware division. The executive also said the expanded relationship with 3Com did not represent a "decline" in IBM's relationship with others.