Claflin Calls Cisco Technology 'Old, Tired'

"I believe [Cisco's] technology is old and tired under the rubric of a proprietary operating system," Bruce Claflin, president and CEO of 3Com, said during an event that also marks one year at the company's headquarters in Marlborough, Mass.

Claflin, who was joined by Massachusetts Gov. Mitt Romney, credited Cisco's accomplishments. But he referred to the networking market leader as an entrenched, successful competitor that tends to lock in customers and limit their ability to upgrade to better technologies.

"They have a cost structure that requires them to price noncompetitively, and their business model will never allow that price structure to stray if they want to preserve shareholder value," said Claflin.

Claflin also said channel partners are tired of Cisco's "view of itself as lord of the mansion and of its partners as the surfs tilling the field. Our motto is the partners make the profits as well, and we are careful not to overdistribute," said Claflin.

3Com provides partners with a fundamentally different business model that offers a solid value proposition and leverages open industry standard technology, he said.

Claflin acknowledged struggles, including the perception that 3Com is still largely a networking company associated with the edge of the network or connecting devices such as PCs.

"That's still a small part of our business, but 3Com's business today is overwhelmingly focused on enterprise networking systems," Claflin said. "But we need to do a better job of telling our story."

To that end, Claflin said the company would continue to be aggressive in its marketing and advertising efforts, as well as focused on empowering channel partners and other target customers.

For his part, Romney applauded 3Com's ability to survive "the perfect storm of the economy" as well as its decision to relocate to Massachusetts. He also touted Massachusetts as a better state in which to do business than 3Com's former home state, California.

Romney noted, among other things, a more competitive tax rate in Massachusetts for companies such as 3Com. For instance, Massachusetts companies are being taxed at a rate of 5.3 percent while California companies are taxed at a rate of 9.3 percent, Romney said.

"We're fighting to make sure we don't raise taxes on companies because raising taxes on you and your company is just like you raising prices for your customers," Romney said. "Ultimately they'll go somewhere else."

Romney also noted the single-sales factor that prevents companies from enduring an additional tax when selling products outside Massachusetts.

"So we don't tax you twice, either sales tax or corporate income tax," Romney said. "We try to make a system that's as fair as it possibly can be."