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Optical/IP

3Com: It's Done

12:20 PM -- After a lifetime of getting slapped down by Intel Corp. (Nasdaq: INTC), then Cisco Systems Inc. (Nasdaq: CSCO), then Cisco again, 3Com Corp. (Nasdaq: COMS) is finally getting sold. (See Huawei, Bain Buy 3Com.)

Huawei Technologies Co. Ltd. and Bain Capital announced the $2.2 billion cash deal ($5.30 per share) this morning, possibly shouting down Nortel Networks Ltd. , The Wall Street Journal says.

3Com's stock shot up immediately this morning. Shares climbed $1.31 (35.5%) to $4.99 as of this writing, giving 3Com a valuation of just about $2 billion even.

The most interesting pieces of 3Com are the TippingPoint security products -- which could still be spun off -- and the H3C Technologies Co. Ltd. joint venture, which 3Com took over in November, paying $882 million. (See 3Com Takes the H3C Plunge.) 3Com still sells stackable Ethernet switches, but it's unclear whether anybody cares.

Forget the products for a moment, though. The deal marks the final goodbye for a fallen Silicon Valley star. 3Com's headquarters are long gone, to Massachusetts. Its old building off Highway 237 bears a Marvell Technology Group Ltd. (Nasdaq: MRVL) logo now. (See Marvell Ascending.) Most of its workforce is in China.

I remember being at a financial conference years ago when, at the end of a session, an analyst tossed out, "We'll be taking a break now. Refreshments are in the hallway. Also, 3Com has just bought U.S. Robotics." A $6.6 billion deal. 3Com's CFO happened to be attending the conference, and he gave some generous time to the press late that afternoon.

Now it's Huawei's turn to go after Cisco. "It’s an exciting deal, and finally, Cisco would need to sit up and watch!" consultant Sramana Mitra comments on his blog.

Would it? Cisco took notice of low-cost Asian competition at least three years ago, and it's been shifting its business model accordingly. It could be that H3C eventually takes a sizable chunk of the router market, while Cisco moves on to a higher-margin Web 2.0 existence. (See Cisco CEO Talks $10B Markets and Chambers at NXTcomm.)

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin 12/5/2012 | 3:01:48 PM
re: 3Com: It's Done More succinctly and more bluntly, Mark Sue of RBC writes:

"From a failed US Robotics acquisition to a disastrous Palm spin out, over-paying for Tipping Point, with many changes in customer focus and strategies, 3Com may end up being the business school case study of what not to do. The back and forth bidding between Huawei for the JV was yet another chapter of poor decision making."

Ouch. True, but, ouch.
bollocks187 12/5/2012 | 3:01:12 PM
re: 3Com: It's Done Is has always been the stupid rich management that failed 3COM.

Cisco will eventually crush the chinese.
commsguru 12/5/2012 | 3:01:08 PM
re: 3Com: It's Done Interesting viewpoint if you subscribe to the global dominance of the US market. This may have been true ten years ago but not now, in reality it's Cisco that should look out as it's for sure the next aqusition target for Chinese money. And let's face they have a huge ammount of USD to spend these days.
cw.774 12/5/2012 | 3:01:06 PM
re: 3Com: It's Done I just don't so much analogy here. CISCO does a lot of good deals. They will do good deals with China. US wants to do more deals with CHina (... but I'm not sure why anymore). North American Engineers will loose their jobs. I hope more slowly than swiftly.
Stefan Sip 12/5/2012 | 3:01:05 PM
re: 3Com: It's Done I will second that. While at it, let's not forget to fully leverage the NA telecom industry, such as Motorola, Nortel, Alcatel/Lucent. Although their combined market cap is barely a third of Cisco, Homeland Security can certainly use them to cover the flank positions on 3G/4G, IMS, Access, Optical, etc, while the Cisco shock and awe can go on an all-IP frontal attack. Huawei, ZTE, Datong, and the rest of 1.3B+ of Chinese won't have a chance.

Whoever claimed the war in Iraq is just a proxy war with Iran is clearly wrong. In reality, it is all about defeating China with the Cisco elites (e.g. Black Ops)
whyiswhy 12/5/2012 | 3:01:02 PM
re: 3Com: It's Done Now Huawei is the proud owner of a manure pit. Well, they certainly can't be worse for the local economy or SV business in general than the former management.

Maybe they can make it grow flowers by stealing a few employees from Cisco, create better code from scratch instead of stealing it. Good for SV engineers and economy to have two heavies in heated battle.

-Why
metroman 12/5/2012 | 3:01:01 PM
re: 3Com: It's Done It should be noted that:

Bain tried to buy the part of H3C that 3Com bought. That 3Com money went to Huawei....

Huawei used some of that money to buy a %stake in the whole 3Com organisation after seeing several months of drop in H3C sales, effectively reducing the overall value of 3Com and getting better value for money.

Huawei basically got what they wanted and spent less money getting it. This is not a new thing. The Chinese have a clear history of driving a deal with creative approaches that some in the west might see as unethical. (not in this case)

The US market leaders should be careful - they may not have scale at the moment but they are clever deal makers and they have plenty of money.

What I see letting them down is the treatment of employees. In China you can spin people out of your company and you will have a queue of willing replacements. In Europe Huawei has suffered by making life tough for sales people to pick up commissions and has lost lots of people. They have made job offers that don't reflect the actual tasks and they are not willing to pay for the most talented people. The result is that the talent in Europe does not want to work there.

Short term deal making is their forte, their achilles heal is a lack of long term people development. Time will tell if they learn; if they do...... look out.

Metroman
bollocks187 12/5/2012 | 3:01:01 PM
re: 3Com: It's Done
Why would any credible US engineer want to work for WhoreWay.

Have you read or seen their hiring and employment practices.

C'mon yes they are a big player (in the East) but they have no credible happy employment base in the West as they do not value the people.

If you believe having large China companies employing engineers in the West is a good thing then you are crazy.
bollocks187 12/5/2012 | 3:00:58 PM
re: 3Com: It's Done C'mon LR editors

I know they pay you guys to advertise but lets be realistic you rating them as a player is not true journalism. Your doing it for the money admit it !
whyiswhy 12/5/2012 | 3:00:54 PM
re: 3Com: It's Done Why would Huawei want to haev a base in SV where engineers already earn high salaries? I believe having MORE employers wanting me (and my compatriots) to work for them is a GREAT thing. More demand, less supply, means more wages increase, not the other way around.

I am a high paid capitalist, not some poor iconoclast working for peanuts.

It's the money, honey.
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