3Com Revenue Takes a Plunge, Drops Dell as Reseller

Following Cisco and HP, 3Com became the latest vendor to drop Dell as a reseller of its products in wake of the computer giant's move to offer competitive wares. During 3Com's earnings call Thursday, CEO Bruce Claflin said the company will no longer include Dell as an authorized reseller of 3Com's enterprise networking gear, though its OEM relationship for network interface cards will remain intact. The move comes after Dell last month said it plans to offer its own branded networking gear.

"We're not going to give them the assistance of our brand and credibility as they attempt to build a networking business," Claflin said. Asked if 3Com would consider manufacturing branded Dell switches on an OEM basis, Claflin said absolutely not. "Dell has typically been a tough company to be a supplier to--we'd rather be a competitor with them than a supplier to them for this class of product."

Despite a negative outlook for the next quarter, 3Com's loss this quarter was substantially lower than the $223 million reported for the same period last year. And its enterprise products are the one bright spot, 3Com said. While revenues worldwide were down 2 percent, in the Americas they increased 9 percent, said CFO Mark Slaven. The company is forecasting modest growth for the rest of the year on the enterprise networking side.

The revenue decline will mostly come from its connectivity unit, which sells network interfaces. Its CommWorks unit, which sells gear to telcos will be flat, while the enterprise equipment is forecast to increase slightly, Slaven said.

In the enterprise networking business, Claflin reiterated the company's effort to invigorate its channels. That includes working with more high-end systems integrators and VARs for its IP telephony products and incentives for those who bring 3Com gear into accounts that have competitors switching, including HP, Enterasys, Nortel and Cisco. In addition, 3Com last week announced a 10 percent rebate for those that convince customers to select Super Stack 3 switches, among other networking products.

Nevertheless, Claflin said 3Com does not intend to get into a price war. "We will not be drunk and disorderly," he said. But "we are going to turn the dial more on this competitiveness."