The 3Com Deal

Arthur Cole

By now, you've probably heard the news that 3Com will be bought out by a private equity firm, Bain Capital, for $2.2 billion, with a portion of that going to the company's former Chinese partner Huawei Technologies.


The question on everyone's mind, though, is whether the deal can actually rescue the company and turn it into a viable competitor to Cisco in the enterprise router and switching market.


The key to the deal is obviously H3C, the joint venture between 3Com and Huawei designed to tap into the booming demand for networking products in China. With Cisco dominating the United States and Europe, the People's Republic represents that last great growth market for Ethernet devices.


The new 3Com will have a slight advantage in China with a non-compete clause with H3C, which accounted for nearly half of 3Com's total revenues last year. Still, it's worth noting that 3Com accounts for barely 2 percent of the network switch market, while Cisco tops 70 percent.


Probably the biggest winner here is Huawei, which now has ready access to the U.S. market and should generate big dollars even if its share of the market is small. It's a page right out of the Lenovo playbook.

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