In a cash deal valued at $100m (£62m), 3Com has sold selected assets of its telecom equipment business to UTStarcom, a broadband and wireless carrier network equipment company.
3Com said it will now focus exclusively on the enterprise market and plans to expand its enterprise lineup with higher end data and voice equipment for medium-sized and large enterprises. Nick Tidd, managing director of 3Com Canada, said 3Com has placed more emphasis on providing networking solutions to the enterprise since about March 2000.
"Upon the completion of the sale, 3Com will be a dedicated enterprise networking company that is totally focused on meeting the needs of enterprise customers," he said. "And for CommWorks to be more successful they need to scale up the breadth of their product offerings as the carriers look to demand solutions that, quite frankly, aren’t in their current portfolio. So that’s why the UTStarcom transition is the right move."
Under the terms of the sale, UTStarcom will acquire patents and intellectual property rights related to CommWorks’ products, plus all equipment, inventory, and current contracts. However, 3Com has licensed some of the intellectual property that remains key to its core business, Tidd said.
"The bottom line, I think, is that 3Com wasn’t making much headway into the carrier side and probably didn’t expect things to change," said Dan McLean, director, enterprise network services research at IDC Canada. "3Com is clearly a company whose legacy and success exits with the enterprise, so clearly it is trying to retain a stronger focus on its core business."
Hong Lu, president and CEO of UTStarcom, said there is virtually no product overlap between his company and CommWorks. "Because CommWorks’ product and service line is complementary to ours it will almost double the market opportunity through customers and geographic diversification," he said.