All: Communications Week article:
3Com Arms For Network Battle
By John T. Mulqueen
From 3Com's planned acquisition of U.S. Robotics, it would seem that Eric Benhamou is a student of military strategy of outflanking, encircling and strangling an enemy.
3Com is the dominant supplier of network adapter cards and a major supplier of low-end hubs and switches that connect to those adapter cards. These components define a LAN's perimeter. These LANs are, of course, interconnected via a WAN, which increasingly is owned and operated by some type of service provider.
U.S. Robotics is the dominant modem supplier and a leading vendor of remote access concentrators. Collectively, these components define the perimeter of the service providers' infrastructure. In both the LAN and WAN, 3Com now controls both sides of the connection. By acquiring U.S. Robotics, 3Com will encircle the network, thereby controlling a substantial portion of everything going into or out of the "captured territory."
Clearly, that territory is heavily fortified and defended by the likes of Cisco and Cascade, but the battle lines seem to have been redrawn somewhat more favorably for 3Com. So is 3Com now an imminent threat to Cisco? Hardly. 3Com has clearly distanced itself from the Intel threat, however.
What about the near-term tactical benefits? For starters, 3Com has put forth a relatively unsuccessful effort to sell remote access equipment to service providers. These resources can now be redeployed more effectively in other areas. U.S. Robotics has had little success penetrating the LAN market. It, too, can redeploy resources more effectively. Combining the companies' manufacturing resources should lower the cost of components and improve manufacturing efficiencies.
But this merger also has serious risks. The merger of SynOptics and Wellfleet demonstrates the hazards of large technology mergers, but there are many differences between that deal and the 3Com/U.S. Robotics agreement. An important objective of the SynOptics/Wellfleet deal was to unlock the synergy of combining Layer 2 switching with routing. That objective is only now being realized with Bay Networks' recent introduction of its new multilayer switching product. There is no need to develop new products that combine the technology strengths of 3Com and USR.
Some critics feel that the relatively low price premium suggests that USR may not be doing as well as some had thought. Perhaps, but it could also suggest that 3Com will do better than many expect, at least in the long term.
Noel Lindsay is a director at DMG Technology Group, Menlo Park, Calif. The opinions expressed are his own. He can be reached via the Internet at Noel_Lindsay@dmgtech.com, by fax at 415-614-1101 or by phone at 415-614-1150.
Copyright r 1997 CMP Media Inc.
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