The Enchanted 3Com Room (Under New Management)
By
Anders Bylund
June 25, 2008
|
CEO Robert Mao has been running 3Com (Nasdaq: COMS) for a scant two months, but he has already formed a vision for the future of his company. A hundred days? That’s for slackers!
Mao (no relation to the former Chinese leader) noted that his company owns about as much market share in data networking equipment as Cisco Systems (Nasdaq: CSCO) does -- in China. The trick now is to extend that position of strength to other markets. Using China as a remote home base, Mao hopes to repeat that success story across the world. One key initiative is to give more responsibility to regional managers, to ensure that 3Com can meet local needs on a global scale. Where have I heard that strategy before?
This new deal is off to a somewhat inauspicious start, though. 3Com reported a fourth-quarter net loss of $167 million, or $0.41 per share, on $321 million in revenue. That includes a writedown of goodwill of about $158 million related to the 2005 acquisition of security expert TippingPoint, in a review that was triggered by recent share price movements. Without that charge and certain other inconvenient cost items, 3Com actually saw a $0.09 profit per share, nine times the $0.01 per share reported a year ago.
So the question now is whether Mao can build a decent market share in other developing regions like Eastern Europe and Latin America, and steal some sales in North America from regionally strong competitors like Nortel Networks (NYSE: NT), F5 Networks (Nasdaq: FFIV), and cheeky upstart Blue Coat Systems (Nasdaq: BCSI). The company pins its domestic hopes on fresh blood at the top of the North American division, while Latin America is developing swimmingly already.
Mao comes to this job from two years at the helm of 3Com's Chinese operations and about 11 years of similar posts for Nortel and Alcatel (NYSE: ALU), so it's natural that he wants to extend the operating models he developed to other parts of the company. Given that China has been such a success story, it's easy to imagine that these tactics could work elsewhere, too. Stay tuned as 3Com tries to climb out of the penny-stock cellar where it has spent the better part of the last seven years.
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