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Born-again 3Com wants network #2 spot

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Interview: 3Com's proposal to spin off TippingPoint, the security appliance vendor, is part of the company's plan to win back its position as the networking industry's number two, says Mike Ansley, the veep in charge of 3Com's EMEA operations.

According to Ansley, the sell-off scheme is part of a big shift in 3Com strategy, which has also seen a wholesale change in the company's management and a new determination to take technology and customer support seriously.

"I think we lost our way on technology. 3Com used to be the price-performance leader when I competed with them," he says - he joined 3Com just a few months ago from WiMax start-up Redline Communications, having spent eight years at Cisco before joining Redline.

He adds, "We have done things to alienate some customers, and we have to win back our right to sell to them. We are actually in-housing our support - the call centre will be housed in the UK to support EMEA. It's a matter of customer intimacy, we want the customer to know they're talking to someone with a vested interest."

Readers with long memories may recall just how big 3Com, which was one of the pioneers of Ethernet, had become by the mid-1990s. In 1996, it even bought the rights to rename San Francisco's Candlestick Park sports stadium as 3Com Park - to considerable derision, it must be said.

Pride often comes before a fall, and it certainly did in 3Com's case. Hit by the millennial recession, it sold or surrendered whole swathes of its technology heartland, becoming a shadow of its former self. Its 2003 joint venture to develop IP routers and switches with China's Huawei, called Huawei-3Com (H3C), was seen by some as the final proof that it had given up any idea of ever making stuff again.

But how times change. Its sell-offs - most significantly Palm in 2000 - left 3Com with around $1 billion on hand. It used that cash-pile to acquire TippingPoint, bought just two years ago, and then this year it bought out Huawei's share of H3C.

"The change of management at 3Com has been fundamental - 3Com has taken control of its own destiny now," Ansley says.

Selling off a slice of TippingPoint, which it has successfully fattened up in the interim, will help replenish the cash-pile - and Ansley notes that it will only be a slice, as 3Com plans to keep a majority stake.

He says that, as many buyers prefer to buy stand-alone security devices, TippingPoint will continue to produce those and 3Com will continue to resell them. For those that prefer their network security integrated, 3Com will pursue its strategy of putting Linux-based OSN (open services networking) application blades into its switches.

Meanwhile, taking over H3C gives 3Com some of the technology and the manufacturing base that its former management abandoned - plus, it gives 3Com a big customer in Huawei, which buys H3C switches and routers to sell to its service provider customers, such as 3G networks.

"It gives us access to technologies from H3C that we didn't have before, such as security, storage and IP surveillance," says Ansley. "A significant percentage of the product-set that my team sells is from H3C - it has products that compete with Extreme and Foundry. We just have to get out there and promote them."

3Com believes that the networking market is commoditising, and that with companies such as DLink, Linksys and Netgear now selling to SMBs as well as consumers, even Cisco will feel the pressure. It therefore wants to use its low-cost Chinese base - once H3C is fully digested, 4000 of its 6500 staff will be in the People's Republic - to regain its number two position in networking.

For anyone who got burned by the 'old' 3Com, the pill might be a bit too bitter to swallow, but Ansley clearly believes that the re-formulated company has plenty of opportunities ahead - even if some observers will see it as a Chinese Trojan horse, just waiting to knock out the smaller US networking vendors.

"Companies can still do well in a commodity market - there's a phenomenal opportunity for a company that can do SMB and enterprise, end to end," he claims.

"This industry is ripe for a viable second vendor, and we are in a position to be that. I couldn't have said that a year ago - the turnaround is very recent, we are right at the inflection point.

"We've had three quarters of operating profit and we had positive cashflow last year. We've got a very strong hand and we just have to play it well."

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