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3Com preps for enterprise-market comeback

With the sale of its carrier-class technology unit, 3Com announced that it was refocusing on the enterprise networking market. However, analysts say that the company needs to clear several hurdles before it can compete with the established vendors.

Last week, 3Com Corp. announced plans to sell its CommWorks business in order to refocus on the enterprise market. It may be a smart market to target, but 3Com has plenty of hurdles to clear before it can compete.

With the sale of its carrier-class technology unit and the ensuing refocus, the Santa Clara, Calif., networking equipment vendor is going back to its roots. 3Com, along with Cisco Systems Inc., was one of the largest forces in enterprise networking in the 1990s. Then, in late 1996, growing competition forced 3Com to abandon the enterprise networking market and focus instead on products for small and medium-sized businesses.

Now 3Com is facing pressure in those markets from companies such as Hewlett-Packard Co. and Dell Computer Corp., said Ken Presti, research director with the Framingham, Mass., research firm, International Data Corp. Getting into a price war with Dell would not be a smart move, Presti said. Instead, 3Com decided to look upstream at the enterprise market.

It is a smart place to look, said Zeus Kerravala, a vice president with the Boston-based research firm, Yankee Group. Right now, Cisco is the leader in the enterprise networking market, but there is no clear runner-up. A crowd of companies, including Nortel Networks Ltd., Extreme Networks Inc, Foundry Networks Inc. and others, are vying for second place.

But 3Com faces some challenges in this market that its competitors do not. For starters, it is never easy to re-enter a market after you've abandoned it, said Dave Passmore, research director with the Midvale, Utah, research firm, Burton Group.

"3Com burned a lot of customers in this industry when they exited. A lot of people staked their jobs on 3Com switches, and then the company pulled the plug on them," Passmore said.

Beyond smoothing over any lingering resentment, 3Com also has an image problem, Presti said. When the company went after the small-to-medium business market, it put its brand in front of the public with moves like purchasing the name of Candlestick Park, home of the San Francisco 49ers football team. While creating that kind of name recognition may have worked well for the small business market, it can backfire in the enterprise.

"If your CIO sees 3Com gear at Best Buy, he's not going to want to build his network on the same equipment," Presti said. Microsoft is one of the few, if not the only company that has been able to appeal to both the consumer and enterprise market at the same time, Presti said, and, even then, it only does so with a small number of products.

But don't count 3Com out. Kerravala said that the health of the company is improving, and it has a track record of providing high-quality products.

"Their strategy is to combine the functionality of a Cisco product with the price of the cheaper guy," he said. If 3Com can do that and start to land some big customers, Kerravala said, it may be able to make a strong return.

3Com declined comment for this story.


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