Birth of a new giant?

Birth of a new giant?

While the full repercussions of 3Com's recent move to acquire US Robotics are still to be felt, what is becoming clear is that Cisco now has a rival in offering end-to-end connectivity. Both the new 3Com and Cisco will now be generating around $5 billion in annual revenue, a figure roughly twice that of nearest rivals Bay Networks and Cabletron.

The $US6.6 billion acquisition rounds out 3Com's product set nicely, adding WAN access gear and modem technology to 3Com's LAN and ATM hubs, switches and network interface cards. Remarkably, 3Com claims only 2 per cent of revenues are derived from overlapping products.

The deal immediately buys it market presence in the consumer market through the USR modem range, in an area where rival Cisco has been making a serious push. But what 3Com will chose to do with its new acquisitions' more esoteric offerings, such as the Pilot organiser, is anyone's guess.

Perhaps of more interest will be 3Com's moves in the 56Kbit/sec modem market. Only a month ago it endorsed the Rockwell/Lucent Technologies 56Kbit/sec modem technology, but the acquisition now means it owns the competing USR X2 technology.

But the bigger challenge for 3Com will be in melding the two corporations into one coherent entity. Some analysts suggest Bay Networks is still struggling to find form following the 1994 merger of Synoptics and Wellfeet that lead to its creation.

It remains to be seen whether 3Com now suffers similar problems. "Bay has provided us a whole list of things not to do in a large merger," said Bay's CEO, Eric Benhamou. "We're not going to change the company name, we're not going to split the job of CEO and chairman, and we're not going to split the board equally in order to avoid a stalemate."

Brad Howarth

Tel (02) 9902 2748

(Additional material from US Network Worldjournalist Jodi Cohen.)

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