3Com poised for a restructure

Networking giant 3Com is believed to be considering a major overhaul of its business and could make an announcement as early as next week.

According to US reports, the company may split its enterprise and service provider businesses into two separate units following similar moves by rivals Lucent and Cabletron. However, the firm has yet to decide whether to spin off the units or sell them, said the reports.

A possible announcement is expected either on Monday, when 3Com reports its third fiscal quarter figures, or at its annual analysts' briefing, which begins next Thursday.

Analysts said they would not be surprised if 3Com restructured its business - a move that has been expected following the spin off of the company's Palm subsidiary earlier this month.

John Armstrong, an analyst at researcher Dataquest, said a split would enable the firm to clarify its ambitions in the enterprise and carrier markets. Although 3Com is the market leader in network interface cards, which falls under its enterprise business, restructuring could boost its carrier interests, he added.

"There will still be continued demand for interface cards, but this market is not as dynamic as the carrier market," said Armstrong.

Despite being active in cable modems, 3Com has yet to outline its ambitions in the optical networking field, unlike rivals Lucent, Nortel and Cisco, he added.

But Laurie Gooding, an analyst at Cahners In-Stat, believes that 3Com's leadership position in the commodity modem and network interface cards market has prevented it from making a big splash in the carrier space.

As a result, she said it would be premature for 3Com to spin off the divisions as independent companies.

"3Com is strong at the edge of networks and with end-to-end network management, but there is confusion as to what it is doing with the company," she said.

The company's strength lies in its ability to understand networking from the users' perspective, based on its experiences of working in the enterprise and Lan space, said Gooding, adding that 3Com's interests in home networking are also worth highlighting.

Such a restructuring would follow similar moves by Cabletron and Lucent. In February, Cabletron split its business into four independent companies, while Lucent unveiled plans in March to spin off its phone switching businesses to concentrate on fibre optic and internet equipment.

3Com failed to respond to the reports.