Opening new doors

3Com CEO Edgar Masri speaks about the company's strategy and its plans for the Middle East.

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By  Administrator Published  June 4, 2007

You will soon be completing a year as the CEO of 3Com. What do you think has been the key achievements of the company this year and what are your plans for the year ahead?

Edgar Masri: The best kept secret has been that 3Com has achieved a positive cash flow the last few quarters. We have been guided into the third quarter of this year with the positive cash income.

I cannot stress enough the importance of this achievement and full credit has to be given to the team for setting up, integrating and working relentlessly towards achieving higher margins and better operations. And this growth is not restricted to just one area. It covers several aspects and it opens the page to the next phase.

The first priority for everyone at 3Com is to increase revenue growth and marketshare for the company and to achieve higher profitability. That is the first goal we are working towards. The next phase would involve concerted expansion into some areas. We are very close to being in the position where we will be ready to invest in expanding our infrastructure and providing existing and potential enterprise customers with the best in technology services and support infrastructure.

In 3Com, you will see a lot of changes in people, solutions and products in the next six to nine months as we work towards an expansion and increase in personnel as well as adding to the levels of service and support for enterprise customers.

In the Middle East specifically, you will witness a lot of combined and concerted effort to increase sales personnel as well as customer support. This is so as the region offers tremendous potential for growth. Other areas are not growing as fast as the region and therefore there is a need to put in drastic investments here.

3Com will also put in concentrated effort in addressing personnel issues.

It is very important to retain talent and the company realises this. The issues of turnover is generic. I am not trying to push aside the issue but it remains a problem for all companies irrespective of their position. Growth generates intensity and turnover. We have hired the GM as the start and we will continue to work towards hiring and retaining more personnel in the region.

How much of the recent positive cash flow is a result of H3C's performance and how is 3Com planning to bring up the flagging SCN division?

All of the positive cash flow is from H3C but SCN has had the lowest loss in six years. You have to look at the combined entity.

I get this question a lot from investors. The fact that we have to report the two divisions separately, due to the loan considerations for H3C's acquisition, is not a clear indication of the economics inside.

My salary is on the SCN side. All legal activities across both divisions is on SCN. Half of expenses on a corporate level can and should be assigned to H3C. That would give a better reflection of these things.

The products that 3Com sells that are sourced in H3C are sold in transfer price. That is an intra company number which is a bit artificial. The higher it is then lesser a profit on SCN and more for H3C.

This is part of the internal set up and how we used to function when we were a joint venture. Now we are one single entity and these hold less of a value. One has to look at the company as a whole or we could end up drawing wrong conclusions.

These are two or three elements that were put in place for certain measurements but are not representative of true economics.

How has 3Com strategy changed and how will it continue to change to face the new breed of enterprise customers?

Our mission and in turn our winning strategy is to become the first global networking player to provide class effective solutions that leverage a modular architecture.

To be truly global, companies have to have distributed R&D resources and that is what 3Com has across US, Europe and Asia - including China and India. Asia provides us with a certain advantage and 3Com has over 5,000 employees or 80% of the workforce working out of Asia to take full advantage of the benefits offered by this situation.

The second important strategy measure is to build more intelligence into the network - and I mean not on the network but in the network. Business requirements across the world indicate a need for secure and reliable network infrastructure that makes data productive according to certain rules. We see unification and integration of various services and applications - including VoIP and security - in a modular format as a critical architecture for the future. And this is becoming possible with intelligence increasing on the switching and routing side of IT.

Our Open Service Networking (OSN) initiative provides an integrated approach instead of an overlay approach. Today, customers have two choices. They can choose best of breed solutions for various needs and applications. That can become a nightmare for capability, management and power consumption.

Or they can go with one vendor and wait for him to provide traffic and application management. For some slow growing companies this could be a good approach. But yet there is a risk.

With OSN, 3Com provides enterprises a community of services that are based on open source and need not be necessarily developed by 3Com. Over 40 partners have signed - some in network monitoring, some others in application virutalisation - and we are just at the beginning.

The second phase is where the increasing adoption of multi core systems will translate into more services with OSN. Just around 18 months from now, when multi core chips become more popular, you can have increased modules in switches without the need for network boxes.

In a nutshell, we give the best of both worlds.

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