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Customers should feel little impact from this week’s acquisition of 3Com by Huawei and Bain Capital, analysts say.
If anything, they should be comforted that they are not dealing with a company distracted by shareholder scrutiny. 3Com will be taken private under the $2 billion deal.
“3Com customers should stand pat,” says Steve Schuchart, principal analyst for Enterprise Network Systems at Current Analysis. “If you’ve already made the choice to go with 3Com equipment this doesn’t give me any pause to say you should stop buying 3Com. If anything, this may distract 3Com from its financial difficulties.”
“I don’t think there should be any short term concern for the customer,” adds Zeus Kerravala, an analyst at The Yankee Group. “If anything the customer should look at this as a bit of upside because it will give 3Com some resources and some freedom to do things maybe they couldn’t do.”
But Kerravala adds a caveat to the deal that customers should be aware of.
“I would certainly raise the question as to what does the Huawei ownership mean?” he says. “Private equity firms are pretty quick to cut off parts of the business that aren’t profitable. Does that mean any kind of product line rationalization coming down? If I were customers I’d ask questions around that.”
3Com went through a wrenching product rationalization 7 years ago when it abruptly dropped its large enterprise core switch line due to little success in that market. The strategy left some customers bitter as they suddenly had vital and expensive equipment with a very short lifespan.
If Bain and Huawei have designs on significantly growing 3Com’s enterprise business, they’ll have to deal with those skeletons, Schuchart says.
“3Com pulled out of the enterprise at one time and they’d like to tell you that that was so long ago, nobody remembers or nobody cares,” Schuchart says. “Well, people do remember. I think that there’s something of a distrust of 3Com because of it, and it’s difficult to get around. They’ve never really recovered from that. What’s really unclear to me is what Bain and Huawei can really do to restore enterprise confidence in 3Com.”
Both Schuchart and Kerravala are surprised that anyone would buy 3Com given the company’s compromised presence in the market and financial challenges since 2000. Of all of Cisco’s enterprise competitors, 3Com seemed the most sickly.
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Comments (1)
Shouldn't we give 3Com a chance?By Cisco Subnet on October 1, 2007, 6:16 pmSo now Huawei and Bain Capital have bailed out 3Com and given it a $2 billion new lease of life, what are its chances of competing with its old arch enemy, Cisco?...
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