US Report: Intel to buy 3Com? Rumours swirl again

The hottest technology rumour on Wall Street yesterday speculated that Intel will acquire 3Com in a bid to corner the Ethernet networking market. The rumour pushed 3Com shares up 10 percent to roughly $30 on Tuesday. 3Com shares were up slightly Wednesday morning.

Neither the $5.4bn (£3.29bn) 3Com nor the $24.6bn Intel are willing to comment about the rumour, but the chances of a business combination were downplayed by market analysts on CNBC and by other technology watchers Wednesday morning.

Some analysts speculate that 3Com investors are floating the Intel rumour in order to pump up 3Com's depressed stock, which is down sharply from a high of $56.75 per share last October. 3Com shares have fallen sharply over the last year because the company has had trouble managing modem inventories.

If, by chance, Intel does acquire 3Com, the combination could give resellers end-to-end networking hardware for homes, small and midsize businesses, and large enterprises. While Cisco dominates the high-margin network backbone arena, 3Com and Intel have cornered the commodity departmental networking market. 3Com commands about 55 percent of the 10/100Mbps Ethernet adapter card sector, with Intel checking in at about 22 percent, according to market researcher In-Stat. Both companies also offer Ethernet switching hubs.

Still, the rumoured combination would have its challenges. For one, there's considerable overlap in the companies' Ethernet product lines. Plus, neither Intel nor 3Com have been firing on all cylinders in recent months. While Intel's processors were late to the sub-$1,000 PC market, 3Com's U.S. Robotics modem division has had trouble balancing product shipments with market demand.