Off from a running start When Robert Metcalfe invented Ethernet in the famed Xerox research lab in the 1970s, he was a little ahead of his time. Metcalfe, who later co-founded 3Com, had developed a powerful networking tool that would in 15 years become the industry standard for connecting personal computers. But in 1979 (the year of 3Com's founding), few people had heard of PCs, and the market for PC networking was miniscule. When IBM came out with its first widely-popular PC in 1982 however, 3Com saw sales take off. The company went public in 1984.
Out to prove its mettle
When 3Com announced its acquisition of U.S. Robotics in 1997 in a $7.3 billion deal, analysts everywhere described the move as "bold," "dramatic," and "daring." They did not, however, speak in consensus on the wisdom of the move. After the merger was announced, a series of complicated negotiations and inventory problems drove 3Com's stock price down considerably. More problems integrating U.S. Robotics led to shrinking profits and layoffs. But 3Com believes that U.S. Robotics' brand name is extremely important to small businesses and customers looking for a familiar company to handle their networking and Internet services. To help build its own brand, until the 2000 baseball season, 3Com lent its name to Candlestick Park in San Francisco.
Look ma, no wires
In 1999, the company pushed into the wireless realm, spurred by its $17.4 million purchase of Smartcode Technologie, a French wireless technology company. As part of its wireless initiative, 3Com announced a new LAN (Local Area Network) system, AirConnect, which can support 63 wireless-equipped PCs up to 200 feet away. 3Com also announced the Palm VII, which features its new Palm.Net wireless communication service. And in August of that year, 3Com agreed to a licensing deal with IBM expected to generate $1 billion in sales.
Spinning wheel?
Once famous for making the nuts and bolts of telecommunications networking, and then celebrated as the maker of the enormously popular Palm Pilot handheld data organizer, 3Com began the new millennium by radically reinventing itself. Having spun off its Palm Pilot division and dropped its modem business (which included U.S. Robotics) early in 2000, the company decided to move away from the production of switches, hubs, remote access concentrators, routers, and network management software, the building blocks of modern telecommunications networks. Tough competition from Lucent, Nortel, and Cisco had forced 3Com into the new field of technology development for businesses. But not everyone has welcomed these changes. Many 3Com partners are concerned about future support and upgrades of their high-end networks now that 3Com has stopped producing them. Moreover, the massive restructuring is expected to cost 2,000 employees their jobs, although 3Com has promised to help most of them transfer to other companies.
A new focus
3Com plans to target consumers, small- to mid-sized companies, and network service providers with IP telephony products, wireless, broadband, and high-capacity Ethernet applications and devices. To accomplish that goal, 3Com signed a deal with network equipment designer Accton Technology Corp and Singapore's NatSteel Electronics Ltd. that calls for the three companies to form a new, Chicago-based enterprise that will design and sell Internet access products. 3Com plans to sell its modem business to the new company. When the smoke clears, analysts expect 3Com's annual sales to be around $3 billion, roughly half what they were in 1998. The company hopes that its transition will ultimately make it more efficient, with total company growth in excess of 20 percent and operating returns of more than 14 percent.
