DownSouth,
I'm not supposed to do this, because it's a site
that needs a subscription price ($10/month), but
here it is anyways. You can get a free 30-day trial
to the site if you're interested.
It's at: thestreet.com
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Top Stories: 3Com Pushing into
Storage-Area Networking
By Kevin Petrie
Staff Reporter
11/2/98 7:51 AM ET
3Com (COMS:Nasdaq) is expected to announce today an
ambitious thrust into a new segment of the
computer-networking business.
The company is slated to unveil plans for a storage-area
networking division. Storage-area networking allows
corporations to store digital data while freeing up
bandwidth on their networks and minimizing the damage of
potential computer failures. The Santa Clara, Calif.-based
company primarily makes modems and small network PC cards
for consumers, as well as higher-end products for
corporations. 3Com is developing this new higher-end
technology with partners including Clariion, a unit of
Data General (DGN:NYSE).
3Com estimates the storage-area networking market will
grow from roughly $250 million today to $1.5 billion by
2002. 3Com ordinarily competes with mighty Cisco
(CSCO:Nasdaq) and other builders of network transport
devices. In this new storage field, 3Com likely will
compete with Network Appliance (NTAP:Nasdaq) and Sun
Microsystems (SUNW:Nasdaq), among others.
"We've been looking at this for almost a year and a half
now," said Joe Ammirato, marketing director for 3Com's
storage-area networking division. Ammirato said 3Com is
responding to demand from corporate customers, especially
financial houses, for a safe and efficient way to back up
data archives. 3Com intends to start shipping commercial
units by early 1999.
3Com declined to state what resources or manpower it is
investing in the storage-area networking division, or to
project how much revenue it might generate. But the new
venture signals a renewed intent to win higher-margin
business from corporations. 3Com draws much of its revenue
from the consumer-oriented business of modems and PC
cards. Price competition nibbled its overall gross profit
margins to 45% in the August quarter from 48% a year
earlier. Sales in that quarter ticked up modestly to $1.4
billion from the prior period, but still were lower than
$1.6 billion a year earlier.
The storage-area networking announcement comes as 3Com is
starting to gain steam. It has wrestled inventories under
control at its U.S. Robotics division, which it acquired
in June 1997. And the new standard for 56-kilobit modems
has helped galvanized sales as well.
3Com's stock has climbed more than 30% since Oct. 8 in a
rally that has lifted a number of the networking stocks,
including market leader Cisco. 3Com ended Friday at 36
1/16, up 1 3/4 on heavy volume. The stock, at its highest
levels since last March, trades at 75 times trailing
earnings. Cisco has bounced from 43 7/8 on Oct. 7 to 63 on
Friday. |
