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Benhamou Steps Aside at 3Com

Light Reading
News Analysis
Light Reading
9/28/2000

Eric Benhamou, the CEO of 3Com Corp. (Nasdaq: COMS) and the man who in the nineties drove his company to second place in the networking market, announced today that he will step aside on January 1, 2001, so that Bruce Claflin, the present COO, can take his job.

Benhamou, who was CEO for ten years, will stay on at 3Com as chairman of the board. He'll also chair the board of Palm Inc., the handheld computer company 3Com spun off in a stock sale in July.

Benhamou also will sit on the board of Atrica Inc., an optical networking company with plans to release high-speed optical Ethernet products for metro networks (see Out of Atrica). Atrica refused to comment on today's announcement, or to indicate whether it would mean a bigger role for Benhamou in the startup. "He's joining our board in October," is all a spokesperson would say.

By all accounts, the time is right for change for both Benhamou and 3Com. The company has been in a long slump, resulting from its inability to follow the networking market into the service provider and broadband space. For months it's been fighting to stem a tide of quarterly losses by taking on a massive restructuring program. This has included selling off its high-end enterprise switch as well as its Palm subsidiary.

"I'm not sure where the company I knew went to," says Jim Lawrence, program director at Stratecast Partners, a market consultancy. "They say they have a new carrier strategy, and their software looks good, but it's largely aimed at packet voice," he says. "Somewhere in all the strategy changes [Benhamou] has lost the thread."

But the restructuring looks to be helping a bit: On Tuesday, 3Com's quarterly earnings were decidedly better than the company had anticipated. It reported a pro forma net loss of $41.3 million, or 12 cents per share, after earlier projections that it would lose $67 to $90 million, or up to 25 cents per share. Not too bad, considering that for the preceding quarter, which ended on June 27, net loss was $147 million, or 42 cents per share.

Still, it's been a long haul, and one could hardly blame Benhamou for wanting another job. After all, the man who wrested 3Com from its founders and led his company to the number two spot in networking behind Cisco can hardly be happy as a has-been.

The market also seems to think that 3Com would be better off without Benhamou. By close of trading today, 3Com's stock price had risen 5.88 percent to close at $18, after opening this morning at $16.75.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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