US Report: New 3Com unit takes on Intel

3Com is preparing to launch a new corporation in a bid to lower its costs, defend against the Asian financial crisis and compete more effectively against Intel in the small-business networking market.

The proposed company, to be named Impacct, will focus on delivering chips for Ethernet hardware beginning in 1999 according to an internal 3Com business development document. The document, dated July 2, 1998, states that 3Com wants Impacct to be profitable as soon as possible, with an initial public offering tentatively proposed for the year 2000 or 2001.

3Com could not be reached for comment but a source close to the company confirmed the document's authenticity. 3Com will launch Impacct with assistance from Asian networking giant Accton Technologies. "Impacct [will be a] critical technology provider for both 3Com and Accton and will need to preserve the strategic relationship with the two parent companies," the document states.

3Com will invest about $7.1m (£4.32m) to launch Impacct, with Accton chipping in about $1m (£.60m). Accton will offer additional financial assistance by giving Impacct access to Accton's U.S. business operations. 3Com and Accton will each hold a 35-percent stake in Impacct, with the remaining 30 percent reserved for an employee stock option plan. 3Com has the option to acquire all of Impacct for up to $25m (£15.24m) in 1999 or up to $50m (£30.48m) in the year 2000, the document states.

Impacct will be positioned as low-cost provider of VLSI (very large-scale integration) Ethernet components, a critical technology in 3Com's strategy to remain competitive against Intel in the small business networking market, resellers say. "3Com has fantastic adapter cards and switches, but they can't rest on their laurels because Intel is giving chase," said Art Brieva, a systems integrator at Intelligent Computer Solutions Inc (www.icsnet.com). "It sounds like Impacct could help 3Com keep its costs in check."

Impacct's hardware will be used in 3Com adapter cards, hubs and switches under the brand name Coolwire. The devices will be engineered and manufactured in Taiwan, with a design centre in the U.S., as well. Impacct itself will be incorporated in Delaware, the document states.

On the international front, 3Com could use Impacct to more effectively ride out the Asian financial crisis according to a venture capitalist close to 3Com who requested anonymity. Impacct will have three primary customers: 3Com, Accton and companies based in Asia. Those Asian customers represent 35 percent of the worldwide demand for semiconductors, the 3Com document states.

On the flip side, Impacct could help co-parent Accton crack the U.S. networking market. While Accton is among Asia's leading makers of Ethernet hardware, the company has so far failed to extend its dominance onto U.S. soil.

Impacct will be headed by a chairman and CEO appointed by 3Com. A seven-member board of directors will include Impacct's chairman, two 3Com executives, two Accton executives and two outsiders. The new company will have about 60 employees. Sources close to 3Com say several executives are expected to resign their positions in order to join Impacct.

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