3Com rebuilds strategy; users keep options open
Bob Wallace
04/28/97
Long delays in key product shipments have turned former data center switch leader 3Com Corp.
into a decided underdog in the hotly contested switching market.
3Com customers who want to move to higher-speed switches in their backbone networks are likely
to look beyond the Santa Clara, Calif., vendor to address their needs until the next LANplex is
ready, analysts said.
TOUGH SPOT
"Many users are looking to upgrade their backbone technology and are willing to change vendors,
which could put 3Com in a precarious position," said Skip MacAskill, an analyst at Gartner Group,
Inc. in Stamford, Conn. "3Com needs to convince its installed base that it will have the products
when they're needed or have interim [packages]."
3Com is pinning its comeback hopes on a new versionof its LANplex switch which is due by year's
end [CW, April 21] and price cuts on desktop switches. 3Com hopes the discounts will drive
demand for data center switches.
But the company faces an uphill battle against current market leader Cisco Systems, Inc. and is
running neck and neck with Cabletron Systems, Inc. Cisco had 38.5% of the $527.3 million market
for high-end Ethernet switches in the fourth quarter last year. 3Com held 19.8% of the market, and
Cabletron held 19%, according toDell'Oro Group, a research firm in Portola Valley, Calif.
3Com user Air Products & Chemicals Corp. in Allentown, Pa., is keeping its options open. "We
won't be locked in to any one vendor, and have alwaysbelieved in keeping the playing field level,"
said Virgil Palmer, manager of computing and telecommunications. "To its credit, 3Com has done an
excellent job getting technology right the first time around." Air Products & Chemicals also uses
Digital Equipment Corp. switches in its network.
3Com readily acknowledges that it is in a tough position. "We were late shipping Fast Ethernet and
ATM and saw our market share [in high-end switching] drop from around 50% to about 17%," said
Ron Sege, vice president of 3Com Systems switching unit. "We won't make that same mistake
again."
But some analysts said the damage is done. "The Fast Ethernet market was laying in wait, and Cisco
took best advantage of it and went from zero market share to roughly 50% share," said Eric Hindin,
ananalyst at The Yankee Groupin Boston. For example, Cisco began shipping a Fast Ethernet card
in July 1995, whereas 3Com didn't ship one until last September.
Sege said 3Com's strategy is to cut prices on desktop switches at the edge of the networkto drive
demand for its high-end switches in the core ofthe network. The vendor recently dropped the price
per port of its desktop Ethernet switch to $99.
"Making desktop switches cheaper will definitely have a ripple effect toward the core of the
network," MacAskill said. "It's the only way 3Com can drive backbone switch sales." |
