Wall Street's Rocky Road
to High-Tech Success
3COM TAKES STOCK
It's becoming one of the most popular spectator sports of the
1990s: watching Wall Street. Once upon a time, playing the
market was considered largely an amusement of the affluent,
who could withstand a dip in the Dow now and then. But
today, more and more "average" Americans are becoming
increasingly obsessed with keeping up with the Jones' portfolio.
There's no doubt about it: Stocks are hot. But is the intensified
focus on the market generating more heat than light when it
comes to high-tech mergers and acquisitions?
Item: Although 3Com's (Santa Clara, CA) pending acquisition
of U.S. Robotics (Skokie, IL) was widely hailed as a savvy
step, an article in The Wall Street Journal reported that the
merger had drawn mixed reviews among financial analysts. One
reason for the decline in U.S. Robotics' share values prior to
the acquisition was "concern that modems have become a
commodity market plagued by permanently depressed prices,"
according to the article.
Janice Roberts, senior vice president of marketing at 3Com,
discusses the relationship between shareholders, market share,
and mind share in 3Com's venture with U.S. Robotics.
Network Magazine: Some financial analysts perceived
the acquisition price of U.S. Robotics as somewhat low.
Do you think this assessment is accurate?
Janice Roberts: We started discussions with U.S. Robotics
when our stock price was somewhat different than it is now.
What we focused on was a fair exchange ratio in terms of the
shares, which we thought we'd achieved with the 1.75
exchange ratio (1.75 3Com shares for each U.S. Robotics
share).
It was important for us to really hit the ground running. This
marketplace is volatile in terms of share prices, and when the
share prices changed, we decided to continue with the
acquisition.
Network: So timing issues overrode stock value
concerns?
Roberts: What was important for us was to do the deal as soon
as possible. If we had put if off until the share prices were
looking more favorable to financial analysts, it wouldn't have
been such a compelling time from a strategic perspective.
Instead of focusing on the transaction price, we focused on the
strategy.
Network: What's 3Com's strategy for optimizing its share
values, particularly in light of the fact that so much of the
company's revenues will hinge on highly priced
competitive products such as modems and NICs?
Roberts: 3Com has increasingly built up its presence on the
systems side of its business. We continue to build large projects
for enterprise customers.
At U.S. Robotics, they have built up a very strong presence
with service providers with their high-end systems platform-and
with business levels equivalent to Ascend's. I think it's a
question of visibility of the product range.
Network: How will this strategy manifest itself in terms of
product offerings?
Roberts: You'll see a higher percentage of products such as
client access devices-either NICs for the desktop or modems.
For example, we recently announced a dynamic access
capability for our network interface card products that brings
the NIC fully into the system, so we can have more intelligence
at the edge of the network. We'll be doing the same with the
modem, as well. Over time you'll see more software value, and
I think this will be reflected in increased benefits to customers,
and therefore more shareholder value. |
