3Com VARs Say Better Times In Store With Bain, Huawei Deal

3Com networking

3Com said early Friday that it has reached an agreement to be acquired by the two companies for $2.2 billion. Huawei will acquire a minority stake in 3Com as a result of the deal.

Speculation as to who might acquire 3Com, and when, have abounded since it was reported in July that 3Com was a potential acquisition target of private-equity firms Bain and Silver Lake Partners, as well as rival Nortel Networks.

When 3Com-focused technicians at Silicon East heard about the deal, they ran to Marc Harrison, president of the Manalapan, N.J.-based 3Com voice partner and excitedly asked if he had heard the news.

"They came running in, saying, 'Did you hear about 3Com? Did you hear about 3Com?'" Harrison said. "They were excited because they hope we can get more resources from 3Com."

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3Com is a good partner with very good products but a definite lack of feet on the street, Harrison said. "We hope their management gets the resources they need to do more to support the channel," he said. "Now, when you're out on a sales call, you feel you are on your own."

Harrison said he feels the main play for 3Com is its phone technology. "It's their non-commodity product," he said. "The other stuff is pretty much a commodity. To get into the voice-over-IP market for about $2 billion with a good customer base and reseller base, well, it doesn't get any better than this."

David Chin, vice president of operations at Intellistore, a Mountain View, Calif.-based storage and voice solution provider, said that 3Com has a reputation for products that are very cost-competitive to those of Cisco on the low-end.

"Maybe it will be a chance for them to move upscale with Huawei's products," Chin said. "The big question is, will 3Com get access to Huawei's technology? It could help them compete against Cisco."

Chin said that Huawei is still a relatively unknown company in the U.S., despite its previous relationship with 3Com.

The two companies formed a joint venture in 2003 called Huawei-3Com (H3) which initially focused on selling Huawei networking products and then later jointly developed products such as high-end routers and switches. That relationship ended last November when 3Com bought out Huawei's 49-percent share for $882 million.

"Huawei's huge in Asia," Chin said. "Will it be like two elephants mating and getting caught in the middle?

3Com has been doing a lot to work even better with the channel, Chin said. And with its relationship with Pleasanton, Calif.-based Polycom, which develops network-based collaborative applications for voice, video, data, and the Web, it has been moving away from just focusing on hardware, he said.

"But Huawei is a hardware company," he said. "3Com looks like it is trying to become a platforms company. It has a lot of smart people, and could give Cisco a run for the money."

It is still too early to know what the impact of the deal will be on the channel, said Dan Donahue, general manager of Dauphin DataCom, a Harrisburg, Penn.-based solution provider and 3Com partner.

"We have a long-term relationship with 3Com," Donahue said. "We'll take a wait-and-see approach. We don't have all our eggs in one basket."

The deal is a positive one for the channel because of the relationship with Huawei, which is almost as big as Cisco, said Eric Handorf, general manager of Anaheim, Calif.-based Navco Network Services, a subsidiary of Navco Security Systems.

But it won't work if they try to adjust 3Com's market or employees, Handorf said. "We've had good relationships with our 3Com reps and other people up the corporate ladder there," he said. "If things stay the same, it will be good for us. But in any acquisition, we worry about something rattling the cages."

Handorf said he does not expect such changes. "I like to think the opportunity for 3Com is to expand because of the Huawei relationship," he said.