|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
MARCH 26, 2003 NEWSMAKER Q&A 3Com's China Strategy CEO Bruce Claflin on why his outfit is returning to the high-end corporate networking market via a tie-up with China's Huawei
Based in Hong Kong, 3Com-Huawei will develop and sell enterprise networking products in Asia. 3Com will also be able to sell Huawei's switches and routers to corporations outside Asia. 3Com President and CEO Bruce Claflin believes Asia's lower labor costs will allow the outfit to offer products at a price that will quickly give it market share. 3Com could use a revenue driver: In the third fiscal quarter ended Feb. 28, revenues fell 15%, to $245 million. Paul Sagawa, an analyst with Sanford Bernstein, thinks 3Com is on the right track. He believes that the alliance with Huawei could turn 3Com into a viable alternative to Cisco. And it's bad news for rival suppliers Foundry Networks (FDRY ) and Extreme Networks, believes Erik Suppiger, an analyst with Pacific Growth Equities. Still, getting back into the high-end corporate market won't be easy. 3Com will have to regain trust of customers it turned away in the past three years, says Suppiger. Claflin spoke with BusinessWeek Online reporter Olga Kharif on Mar. 20 about 3Com's strategy for reentering the enterprise area. Edited excerpts of the interview follow: Q: Why reenter the high-end enterprise market now? A: Our belief is that customers today are looking for a superior value proposition. We'll have a full line of highly competitive, innovative, and feature-rich products that can be owned at low cost. The costs of installing and managing them will [also] be lower than [what people are paying] for today's complex networks. We really believe that the venture allows us to give customers a superior offer to anything they've ever had in the past. Q: Does this position you as more of a competitor to Cisco? A: Yes. Cisco and a number of other companies that play in the enterprise space. Q: What does your Asian partner bring to the table that you didn't have? A: First, they brought a product line we don't have. We have products for small to midsize businesses. Our partner brought us a high-end extension. Second, Huawei gave us the ability to penetrate the Chinese market, which is one of the fastest-growing in the world. They are, arguably, the most successful information-technology company in China, and that will allow us to grow in that important market. Third, they gave us access to a high-quality, low-cost engineering base. We'll have about 500 engineers in our joint venture. They're competent, highly trained, and cost far less than comparable engineers in the Western markets. Q: The terms of the joint venture state you'll be able to get a majority stake in three years. Why did you not get the majority stake in the joint venture immediately? A: The dominant resources going into this venture -- people and products -- are from Huawei. Our partner is much more familiar with the products and the technology. Also, the principal market for the joint venture is China -- which, again, Huawei is the expert on. So we believe it made more sense to let Huawei be the majority owner, particularly during the transition. But in a couple of years, we certainly have the right to change the ownership around. Q: Before the joint venture was announced, analysts speculated that perhaps you would buy a networking vendor. Is that no longer a possibility? A: There were a lot of people talking about the companies we might buy. Interestingly, no one in 3Com was [talking about it]. The rumors that we saw were, frankly, purely garbage. However, nothing about the way this venture is structured would preclude us from either making more investments in our own company or acquiring other businesses. But it's not something we have imminent plans to do. Q: You now have a large products portfolio to show your high-end corporate customers. But some analysts say you're not staffed sufficiently to sell or support these products. A: Our company sells a substantial amount of products to corporations, including large ones. We have a global distribution network that's among the broadest in the industry. And we have an installed base in large enterprises that's generally regarded as the second-largest in the world, behind Cisco. However, this product line allows us to play in segments of the enterprise market we've never played in before. So, yes, we'll need to grow our sales, marketing, and service capabilities to represent these new opportunities to our customers. Q: Because you stopped offering some enterprise products, you'll have to win corporations' trust back. How do you do that? A: I think you give them more of what they want. Give them a superior value proposition, and customers will respond. I believe that...customers pay too much for outdated technology. I believe they can and should expect more from their vendors. If we can meet that need and provide them with what they're looking for, I think they'd respond very favorably. Q: Your sales declined again this quarter. When will the networking market turn around? A: In the aggregate, the networking industry is still deeply troubled. Investment is going to continue to be tight, and it's going to be very difficult to get customers to spend on anything other than products promising very fast payback, so I expect the industry will continue to struggle. Within that, there are [some promising opportunities]. For instance, China defies world trends and continues to grow. But the industry overall remains troubled. That's another reason we decided to do this joint venture. There are many companies in the industry today that are, basically, huddled down into a fetal position, hoping desperately that the market will improve so that they can resume growth. We decided to make our own future and to be able to grow and take market share regardless of the overall market conditions. If the industry improves, that's just icing on the cake.  Edited by Patricia O'Connell Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | MARCH |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
