Lucent buys ascend, cisco buys cerent, 3Com buys the farm. For a networking company, 3Com is awfully disconnected from both its customers and the market. But then again, it isn't much of a networking company.
The topsy-turvy world of 3Com went for another loop a couple of weeks ago with the company's announcement that it will spin off its Palm division. Hopefully, this decision will allow 3Com to pay attention to its core business: networking.
3Com may very well be the most unlucky networking company in the world. It acquired U.S. Robotics and bet on analog, only to watch the world go digital with DSL and cable. It bet on ATM, and the world went Ethernet, which is especially ironic considering that 3Com invented Ethernet.
And in the latest wave—the rise of Layer 3 switching—3Com had only a pathetic, yet expensive, offering in its CoreBuilder 3500. The company was also noticeably absent from the Gigabit Ethernet market, choosing to resell switches from a competitor, Extreme Networks.
While the other three members of the Fab Four of networking—Cisco, Lucent and Nortel—acquired expertise in the gigabit area, 3Com execs stood still. Perhaps they couldn't find the telephone numbers of any of those companies in their little PalmPilots.
SMELL THE COFFEE
If 3Com gets focused, it could be the sleeper of the networking industry. Sitting atop $1.5 billion in cash, 3Com has numerous options. From my vantage point, none of those options has it continuing in the enterprise networking space.
At the high end, products such as 3Com's CoreBuilder 9000 get whipped by less expensive, more robust devices such as Extreme's Black Diamond or Foundry Networks' Big Iron. At the middle tier, Cisco and Nortel get more aggressive every day.
That leaves the low end, which, although large, has some of the worst margins in the business.
However, 3Com has one of the most recognized names in the retail channel. The company could capitalize on this to seize ownership of the nascent home networking market, which is widely regarded as the next frontier in networking.
However, old 3Com foe Intel also has its eye on this market, and a new competitor—Broadcom, with its $10 billion market capitalization—is lurking on the horizon.
Broadcom made a commitment to the market with its $300 million purchase of Epigram. By standing still, will 3Com miss this boat the same way it watched from the dock while the enterprise networking fleet sailed off? Quite possibly. If it does, it will be because of the company's confusion about its identity. Right now, 3Com sells Palms, IP phones, digital video cameras, modems and—oh, yeah—some networking equipment.
Maybe it should get rid of all of that networking stuff and use the other gear to own the home networking market. Can you imagine a house with a 3Com digital video camera, 3Com IP phones and much of the household machinery controlled by—you guessed it—a PalmPilot? For the company's sake, let's hope somebody can.
What do you think 3Com should be selling, networking gear or the company? Send me your thoughts at pankaj_chowdhry@ zd.com.