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Can 3Com bounce back?

After losing market share and floundering in the enterprise market, 3Com Corp. is attempting a comeback. The Marlborough, Mass.-based networking vendor still has strong brand recognition and technological know-how. But can it effectively compete with San Jose, Calif.-based Cisco Systems Inc. and other networking giants?

Robert Whiteley, an associate analyst with Cambridge, Mass.-based Forrester Research Inc., recently wrote a brief on 3Com titled, "Can 3Com Rebuild Itself?" Whiteley is bullish on the company, and we sat down with him to find out why.

Where did 3Com go wrong with its enterprise strategy?
In the last few years, 3Com went in too many directions instead of staying focused. The company tried to get into security and enterprise VoIP [voice over Internet Protocol]. It is still in those areas, but a few years ago, one hand did not know what the other was doing. It made acquisitions of companies with disparate technology. There was redundancy in its development work. Eventually, the company lost market share and some of its brand image.

3Com narrows loss

On Tuesday 3Com reported a lower quarterly loss of $18.7 million, or 5 cents a share, for the fiscal period that ended May 28. During the same quarter a year earlier, the networking vendor posted a loss of $38.4 million, or 11 cents a share.

 

For more on the Marlborough, Mass.-based vendor's earnings report, see this story from Reuters.

How has the 3Com name fared over time?
3Com remains a strong name in the small business, government and education markets. It tends to offer a more integrated approach and more product options than other low-cost vendors. Our survey results show that it is the No. 2 brand in the small and medium-sized business market.

But in the enterprise market, it is not considered all that often. 3Com's initial attempts to get into the enterprise market were fragmented. Its most significant enterprise accounts have been using 3Com gear in branch offices. But its products are strong; it is a great engineering company. You say 3Com needs to reinvent itself in the enterprise market. What does that mean?
3Com turned off some enterprise customers by abandoning them with products that it is no longer going to support. 3Com needs to get back into that market with good product offerings and partnerships, and it needs more clarity in its approach. How can 3Com differentiate itself?
3Com plans to move to a more open approach using only standards. It was a big pioneer. It used to forge ahead with proprietary solutions and then push for the standards bodies to adopt its approach. But by adopting standards, 3Com can keep costs lower. It still offers amazing support and professional services. It is the kind of support you would get from Cisco, but with cheaper off-the-shelf products. Can 3Com compete with Dell Inc. on the low end of the market?
It is going to do well against Dell, especially in sizable deployments. And even in the SMB market, the brand is well recognized. But Dell is fabulous at reinventing the way commodities are sold. If some IT manager wants to hop on a Web site and buy something quickly, he's going to go with Dell. But if a business is deploying VoIP or trying to tie business processes to its infrastructure, then 3Com has more of a vision and experts to consult, versus some guy [from Dell] on the phone in Austin.

For more information

Read our exclusive: 3Com preps for enterprise-market comeback.

 

Download our white paper on 3Com's power over Ethernet offerings.

Many vendors are jumping on the all-in-one security device bandwagon. Is this really a differentiator for 3Com?
Security is very important, especially because the SMB guys are just realizing the importance of security. With so many worms and viruses, it is just a matter of time before a network is attacked. And many small businesses can't afford expensive point solutions. An all-in-one security solution is very important for this market and it helps round out its [3Com's] portfolio. When should enterprises start looking at 3Com?
Small and medium-sized businesses should not hesitate, but large enterprises may want to wait. The biggest concern is using products that have not been on the market long. The value proposition and support model is not well known. I would give 3Com a year to deploy the products and support them. Assuming that there are no horror stories, then large enterprises can be comfortable rolling out their products.

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