3Com reacts to fading NIC, modem market

3Com's twisting business strategy took another turn last week when it promised not to rely on network interface cards (NICs) and modem business to support future growth.

3Com's stock price dropped almost 14 per cent on hearing the news, which followed disappointing but better-than-expected fourth-quarter financial results.

The company told Wall Street analysts that it expects 20 per cent of its fiscal 2000 revenue to shift away from NICs and modems to switches, remote access gear and handheld devices.

NICs and modems accounted for 45 per cent of the company's $US1.42 billion in fiscal 1999 fourth-quarter revenue.

However, some analysts believe revenue growth will be even tougher in the next four or five quarters as global sales of NICs and modems taper off.

3Com wants to rely even less on these products for future growth and will aim to derive 75 per cent of its revenue from other products.

"As we enter fiscal 2000, rapid growth of emerging new businesses such as handheld computers, IP telephony and broadband access, coupled with the success of our systems solutions, are transforming the growth profile of the company," said Eric Benhamou, 3Com chairman and CEO, in a statement.

Three markets

3Com's Australian and New Zealand managing director, Gerhard Rumpff, said the corporate transition is part of managing the emphasis placed on many different product lines.

In Australia, the company will push ahead in three main markets: SMEs, carriers and education.

While the local operation has also made a name for itself with bread and butter NICs and modems, Rumpff indicated the desire to achieve carrier sales growth will see it renew the focus in high-end networking. This includes the Total Control product range covering IP Telephony, VoIP and broadband network markets.

"We see a tremendous growth in cable modems and DSL modems," he said.

Meanwhile, 3Com recently completed a national roadshow with Telstra to promote a joint SME Internet connectivity package. The exercise added around 250 resellers to the 3Com fold.