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PalmPilot at the helm as 3Com takes new shape

Time to cast off low margin kit, says Benhamou

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3Com is to turn its back on some of its traditional product divisions in an attempt to boost profitability. The networking giant turned in disappointing results for its third fiscal quarter, and may sell older units and concentrate on higher margin business. CEO Eric Benhamou said the company needed a revamp to boost sales growth. The move to concentrate on its newer, faster-selling products, such as the PalmPilot hand-held computer, may start within a few months, said Benhamou. 3Com's earnings and profit were damaged by slow sales of its modems and adapter cards. Benhamou said it would be likely to shift those businesses, and has already begun diverting funding out of these areas. Some of these or other units will face the chop if they cannot be turned around. "We may sell some of those (businesses) to someone who can get a better return on their investment," said Benhamou. "We have a sense of urgency to give higher returns to our shareholders." One analyst told Bloomberg that 3Com's reorganisation would revolve around the market-leading PalmPilot, sales of which so far total 4 million. 3Com was itself the subject of takeover rumours last month, with buyers said to be queuing up to get a chunk of the network heavyweight. ®

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