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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (29762)	4/19/1999 4:10:00 AM
From: Tim McGee	Read Replies (1) \| Respond to of 45548

The edge strategy argument.. Doug (and Tom), your discussion points are good. When COMS articulated an edge strategy, it did so in networking terms. Rather than focusing on the devices connected to the edge such as handhelds, this strategy focused on the equipment at the end-user connection end to access concentrators thru to equipment that went close to the core. The idea was that the core of the network would be full of equipment that was essentially non-intelligent but super-fast to support the high bandwidth needs of the future net. Essential to this strategy was the equipment that fed into this central network of high capacity equipment. From this point out to the connected user, equipment would be smarter - determining the type of traffic (voice, video, data), aggregating or segmenting traffic, prioritizing different data types flowing over various types connection media (from 33K modem lines to MultiGB ATM). This essentially what 3Com was trying to define as the "Edge". 3Com has products in many of these areas such as the Total Control line that could be the access platform and the high capacity switching equipment to extend towards the core. 3Com figured it could use its traditional strength at the user end of the network combined with the access platform, to have an impact right up to the core of the network. The thinking behind the strategy was that the need for intelligent networking devices would extend all the way to the desktop (NICs, Modems). PCs or handhelds were not themselves edge devices since they were not responsible for intelligent networking (routing, prioritizing or segmenting network traffic). So far, this strategy has not materialized in any big way. While there are signs that some of it might come to pass, the markets will not recognize this for some time. 3Com's communication of this strategy has been nothing short of confusing. Its not smart to articulate a strategy to WS that it does not understand. Clearly they did not and do not understand an "edge" strategy. To many analyst, this just boils down to Modems and NICs. EricB's oft-repeated statement; "we don't participate in the core" compounds this confusion. The bottom line is that this "strategy" is both confusing and did not materialize, therefore it can be said this it has failed. Which brings us to the important issue of what to do next. 3Com mgmt has no credibility left with WS. Any repackaging of a new strategy will NOT lead to improved shareholder value in the near or 1yr term. Given that 3Com has not provided shareholder value for at least 3-4 years, the only thing that will do it now is to break-up the company and sell it. PALM should be spun off as its own entity and the rest of the company should go to the highest bidder (Siemens, Intel, Ericson, Alcatel and maybe even CISCO would be interested in COMS product line and willing to pay a good premium over current share price). Palm on its own would reach a fairly high valuation based on the potential for that business. It would allow it to be more focused with much more resources to acquire, promote and partner with key companies. Taking the division public would yield significant benefits to COMS holders since they would end up with some amount of shares in the company. Everyone would want to own this stock. Siemens, Ericson or Alcatel could swallow the rest of COMS whole. All would be in a better position b/c of it. 3Com's products are good, it does not have a clear focus. It needs significantly more resources than it currently can bring to bear on gaining in the convergence race. 3Com has no real good short term answers to revive shareholder value. Any new "strategy" presented is simply window dressing with the same underlying facts. Tim