Claflin Sets New Course

Midrange switches, LAN telephony and wireless are keys for 3Com.

Bruce Claflin is president and CEO of 3Com Corp., of Santa Clara, Calif. Like nearly all networking companies, 3Com has suffered several quarters of steep losses and has instituted layoffs and restructuring. Now trying to lead the company back to profitability, Claflin has sought to boost the companys cash position and focus on markets where 3Com is strongest. Claflin was interviewed by Senior Editor Carmen Nobel, Senior Writer Matt Hicks and Executive Editor Stan Gibson.

eWeek: Are you turning the corner? When will 3Com be profitable again?

Claflin: Yes, I would say we are turning the corner. We did achieve pro forma profitability, but I wont say when well attain GAAP [Generally Accepted Accounting Principles] profitability. As the business turned down for all networking companies, many balance sheets were in disarray. However, our balance sheet is one of the strongest in the networking industry today.

eWeek: are you suggesting that during the downturn, you could gain ground behind Cisco [Systems Inc.]?

Claflin: We tend to think of ourselves as No. 1 in our markets, not as a follower of Cisco. We are extremely strong in areas where topologies are distributed. However, we view ourselves as an alternative to Cisco, and we are gaining market share in the enterprise. According to a study by the DellOro Group [Inc.], we gained 2 points of share in the Layer 2 market. Were also doing well in Layer 3 Gigabit switching, which is a new area for us, at the expense of Extreme Networks [Inc.] and, to some degree, Cisco. These are encouraging signs in a difficult market. Were encouraged by substantial growth during the last two quarters in the market for LAN telephony products.

eWeek: Having left the high-end market last year, arent you creeping back there with switches with high-end features?

Claflin: In March of 2000, we exited the market for high-end chassis products, although we still offered the Switch 4000, which was in the sweet spot of our product line. But, yes, we are moving back upscale into higher functionality. This time, it is with Ethernet- only, modular-chassis products and XRN [Extensible Resilient Networking]. Its a different strategy. Its practical to own and use.

eWeek: Do you plan products with content—Layers 4 to 7—switching that might bring you into competition with, for example, Extreme Networks?

Claflin: We are investing and developing there, either as an add-on capability or as an appliancelike device. We do offer a Layer 4 switch already. However, we would not go head to head with Extreme—it would be more of a glancing blow. They tend to try for the higher-performance, higher end of the market.

eWeek: Which of 3Coms business units—Business Networks, CommWorks and Business Connectivity—is growing the fastest, and on which are you spending the most research and development money?

Claflin: Business Networks, which is responsible for enterprise products and IP telephony products, and CommWorks, which makes telecom equipment, are growth businesses. They have investment for growth in the near term. However, Business Connectivity is the NIC [network interface card] and PC Card business, and it is principally a business in decline. A 10/100M-bps NIC connection a year from now will cost a buck or two. Even so, we are putting intelligence on the processor and building an embedded firewall right on the NIC.

eWeek: Please discuss 3Coms wireless strategy, including your approach to "hot spot" technology?

Claflin: Broadly, were in three different wireless technologies: Bluetooth, 802.11—were offering [802.11]b, [802.11]g or [802.11]a access points—and wide-area CDMA [Code Division Multiple Access] technology through our CommWorks subsidiary that allows carriers to deliver 802.11 for hot- spot services. 802.11b, [802.11]a and [802.11]g are really going to be important. Most customers arent sure how they want to deploy the next turn of the crank. Were going to give them a platform that says you can go whatever way you want. But we are going to drive [802.11]g.

eWeek: Is Bluetooth overachieving? Underachieving?

Claflin: Its overrated in the near term, and, frankly, I dont know, long term. But the Bluetooth buzz is growing with regard to connecting handsets with PDAs [personal digital assistants] and personal computers.

eWeek: How important is voice over IP to 3Com?

Claflin: Our NBX product in the voice-over-LAN market is growing very well. LAN telephony has passed the knee of the curve and is now going mainstream. Its reliable, feature-rich and has good economy.

eWeek: What about handsets?

Claflin: Wireless handsets are coming. Weve looked at the opportunity, and were continuing to look at it and through our NBX handset. I dont see a compelling business need in the next six to nine months.

eWeek: What is your 10 Gigabit Ethernet strategy?

Claflin: We see it as an aggregation point to integrate switches. I dont see the price coming down to a reasonable level in the next three to four quarters.

eWeek: What is your strategy behind seeding startups such as optical Ethernet company Atrica Inc. and Intransa Inc., which makes data storage products?

Claflin: Both Atrica and Intransa were spun out of 3Com. We had some technologies and believed they could be attractive, but the markets were a bit far afield from our focus. So we thought they could do better in independent companies. We do collaborative selling. But, otherwise, we are hands off.

eWeek: Overall, what enhancements can we look for in the next few months?

Claflin: In CommWorks, youll see enhancements to our media gateway and soft switches. Youll see enhancements to our wireless access points for 802.11a, [802.11]b and [80211]g. Well also have new software for our NBX products so you can go to 1,500 end points per switch.