CEO Bruce Claflin is remaking 3Com into a tier one enterprise networking vendor.
3Com Corp., like many of its networking industry competitors, has been fighting to regain profitability and stability in a market that has been suffering from slow customer demand. 3Com lost $79 million in the most recent quarter. Deciding to focus on the enterprise networking market, the company sold the assets of its CommWorks telecom equipment unit to UTStarcom for $100 million. Bruce Claflin, 3Coms CEO, discussed the companys progress with eWEEK Editor in Chief Eric Lundquist and Executive Editor Stan Gibson.
What steps are you taking to bring 3Com back?
We decided there were three or four things we would have to do to gain market share in an otherwise ugly industry. First, we had to get a full line of infrastructure products to sell to the enterprise.
The second gap was in voice over IP. We believe that voice over IP is real and compelling and its going to happen now. While we had a good product line it was, again, low end.
Third gap: While the industry overall is fairly depressed, there are pockets that are doing very well and China struck us as enormously attractive. We wanted to have a strong position in that market, which I believe it is the most attractive IT market in the world.
The last gap has to do with cost. I believe the networking industry is going to have price pressures and cost pressures. You have to demonstrate value for the dollar. In the early days of networking that wasnt on customers minds. Today, the payback has to be real and hard.
That brings us to your Chinese partner, HuaWei. Can you elaborate on your relationship?
We concluded the most attractive company to help us would be HuaWei, with a dominant position in the Chinese market and excellent engineering skills. They had just gotten into the enterprise market with a complementary product line to ours. They thought they couldnt expand internationally without a partner.
The joint venture enables us to have a complete line of products, because HuaWeis product line includes a full line of modular switches and a full line of routers. Were going to build an integrated road map for the combined product line.
HuaWei and 3Com products will be sold under the joint ventures logo in China and Japan. Everywhere else our products and HuaWeis products will be sold under the 3Com name. I believe we can become No. 1 in the China market. (Cisco Systems Inc. is No. 1 now.)
The venture will give use help on our cost structure. Weve been moving a lot of our manufacturing to China, and about 60 of our volume is made in China.