More: 3Com May Buy Some Companies, Sell Unprofitable Units
Santa Clara, California, May 27 (Bloomberg) -- 3Com Corp., the No. 2 network-equipment maker, will
make acquisitions and may sell older units that it can't make profitable as it tries to reignite stalled
revenue growth, Chief Executive Eric Benhamou said.
The moves, some of which may come ''within a few months,'' are part of a plan to rebuild 3Com around
its newer, fast-selling products such as the PalmPilot hand-held computer, Benhamou said in an
interview.
3Com reported earnings and profit well below forecasts for its fiscal third quarter on slowing sales of
its telephone modems and adapter cards that link PCs to corporate networks. The company has already
begun shifting resources out of those businesses, which make up about 45 percent of the company's
revenue, and may sell them or other units that can't be turned around. ''We may sell some of those
(businesses) to someone who can get a better return on their investment,'' Benhamou said at the ''Vortex
'99'' conference in Laguna Niguel, California.
He declined to give details about which businesses are most likely to be sold or acquired, or whether
3Com had been approached by any potential buyers of its Total Control line. Those products, worth about
$600 million in annual sales, are used by service providers to receive incoming Internet calls.
Transforming 3Com
The company will use a combination of divestiture and acquisitions to ''fundamentally transform'' itself,
a process Benhamou hopes to complete within 18 months. ''We have a sense of urgency to give higher
returns to our shareholders,'' he said.
3Com's relatively low stock price means the company may be restricted to buying much smaller
companies, said Paul Johnson, an analyst at BancBoston Robertson Stephens, who has a ''buy'' rating on
the stock. ''They don't have the currency right now,'' said Johnson, who added that the company will
need to better manage its existing businesses and bring up the stock price. ''They need to take little
steps,'' he said.
3Com is shifting research spending to build cable modems and other equipment that provides high-speed
Internet access.
3Com's line of market-leading PalmPilots, the newest of which has a wireless Internet connection, will
be at the core of the revamped company. The company has sold about 4 million of the devices, he said.
3Com shares rose 3/32 to 27 3/32. Shares have fallen 40 percent for the year to date.
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