Just six months after renewing its focus on enterprise networking, 3Com told analysts yesterday that it would undergo a major overhaul.
3Com's restructuring plans, which had been expected, were announced at the same time that the network vendor released its third-quarter earnings.
3Com said it would bow out of the large enterprise LAN and WAN businesses where it had competed with global powerhouses like Cisco Systems.
3Com officials said the company will discontinue its CoreBuilder LAN switch line as of June 30 and transfer the technology to Extreme Networks.
Extreme will provide a "migration path for existing CoreBuilder customers" by merging CoreBuilder products into Extreme's Summit and BlackDiamond lines of broadband network switching equipment, 3Com said. But 3Com vowed to continue support and engineering services for existing CoreBuilder customers.
Moreover, 3Com said it would also get out of the large enterprise WAN business and cease shipment of its PathBuilder and NetBuilder WAN products by June 30. Officials at 3Com said customers of discontinued products would continue to receive service for up to five years.
3Com president Bruce Claflin said the company would transfer its desktop and PC card modem business to an alliance made up of Natsteel Electronics (NEL), an electronics manufacturer based in Singapore, and Accton Technology, a network switch manufacturer in Taiwan. NEL is slated to acquire the Mount Prospect manufacturing facility and retain the 1,200 employees currently affiliated with this unit, according to 3Com.
Although 3Com is moving out of core networking for the large enterprise, Clafin said the company would continue to provide LAN products for small and midsize companies.
3Com Senior Vice President and General Manager Edgar Masri said the company will now concentrate on customers that value simplicity.
In addition to Gigabit LANs, 3Com will focus on supplying appliances for Web caching, firewalls and network load-balancing, said Masri. The company will also continue to provide products for LAN telephony, wireless networking and broadband Internet access.
The company said it also plans to leverage the 3Com brand name to sell home networking devices.
3Com officials said the restructuring could affect up to 3,000 employees. Still, some 2,000 employees could be transferred to other operations created through the new alliances.
Michael Speyer, an analyst at The Yankee Group in Boston, said 3Com is reorganizing based on its core competencies. That includes networking equipment for small and midsize businesses and home networking equipment for consumers.
"Some customers may be angry, some may see it as an opportunity, some may not care," Speyer said. What is important, he said, is how 3Com manages the transition.
Meanwhile, 3Com reported that its third-quarter revenue rose slightly, reaching $1.42 billion for the period ended February 25 compared to $1.41 billion for the same period a year earlier. Excluding one-time charges, 3Com reported net income of $97.4 million for the quarter compared to $89.6 million a year earlier.