Summary
- 3Com has consistently been a major disappointment for the past decade
- Success in China is not just about product
- Success in Europe is not just about product
- Success in the USA is not just about product
- 3Com lacks all of those other things that success depends on in mature markets
Analysis
Let's face it, 3Com has been a disappointment since Bruce Claflin led the company's fateful retreat from the enterprise switching market in 2001. Apparently, they actually called the project to immediately discontinue the company's modular switching product line 'Catapult'. No doubt the unprecedented discontinuation from a formerly large player must have felt like a ride in a catapult for their employees and customers.
Inside China, having a Chinese-made and co-branded Huawei-3Com product line combining the nation's flagship telecom equipment brand and a well-respected (in China) US brand is better than anything Cisco can offer. Assuming the product line is feature-competitive, the Chinese sales channel and brand will win the day for H3C, and have been winning as they are consistently ranked as the market share leader in various industry share reports.
Outside China however, the 3Com name is not only tarnished from the Catapult experience, but for most IT managers, centered on obsolete positioning. 3Com has been the finest purveyor of tiny little boxes and NICs (a technology that Intel obsoleted a decade ago). Most of the portfolio that isn't made by H3C is OEM'd from Acton and other Taiwanese suppliers, which is suitable for an intense distribution network of VARs.
Also, 3Com has no direct sales organization. Large enterprise core switch deployments typically involve purchases of hundreds of thousands or millions of dollars of equipment and therefore generate long sales cycles and technical knowhow that only a direct sales force can deliver. This is an expensive model and one that decision makers insist on.
The firm's acquisition of TippingPoint in 2005 was a bright spot for a short while. But 3Com did not integrate the unit and now that Intrusion Prevention Systems are available as open source projects and from a wide array of competitors, the advantage has somewhat dissolved.
It will take years and probably sustained investment of $1 billion for 3Com to overcome these issues in the US market alone, especially since the company tried and then abandoned re-entering the enterprise market at least once before. Does the board have that kind of stomach, and will it be worth it in the end?
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
