3Com and Huawei deal delivers mutual benefits

Huawei Technologies and 3Com have announced a joint venture that should give the latter an end-to-end networking product portfolio to seriously challenge Cisco in the enterprise sector.

  • E-Mail
By  Zoe Moleshead Published  April 28, 2003

3Com & Huawei tie up|~||~||~|Huawei Technologies and 3Com have announced a joint venture that should give the latter an end-to-end networking product portfolio to seriously challenge Cisco in the enterprise sector.

The deal will see Huawei contribute its enterprise networking products, including local area network (LAN) switches, routers, engineering, licenses and sales & marketing resources, while 3Com will provide US$160 million in cash plus its operations in China and Japan.

Although the joint venture project has still to be approved by regulators in both the US and China, 3Com and Huawei do not see this as an obstacle to their development and suggest that when the approval comes through in the next three-to-six months, the natural synergies between the two companies will ensure a smooth integration.

“The first thing people have remarked on is the absolute synergy between the two companies and how much we both benefit from this deal. The first benefit we get is penetration into the Chinese market, which is huge and growing incredibly fast. The second major benefit that we both get is the ability to offer far broader enterprise solutions than we could have done on our own,” says Buddie Ceronie regional director, multi-country region, business networks company, 3Com.

Analysts also believe the deal has benefits for both parties, with Huawei able to capitalise on 3Com’s brand and channel and expand out of the Asian markets that it has dominated over the last few years. “Huawei wants to expand globally. 3Com’s brand, sales channel and products will enable Huawei to enter the enterprise market in North America and Western Europe,” says a Gartner Group report.

Furthermore, the joint venture, which will be known as Huawei-3Com in Chinese and 3Com-Huawei in English, represents 3Com’s move back into the high end enterprise space. The networking vendor exited the sector in 2000 when it was struggling against the economic downturn, but Huawei’s products will enable it to seriously challenge the enterprise dominance of Cisco.

“We haven’t been in the router market for some years and we now truly have an end-to-end enterprise product suite and we have a very differentiated value proposition from our competitors,” comments Ceronie.

“The deal will fill holes in 3Com’s product lines in routing and high end switching. 3Com will be able to offer end-to-end networking products and compete more effectively with Cisco and Nortel Networks,” confirms Gartner Group.

Further proof of 3Com’s renewed focus on the enterprise sector is the fact that it has sold off many of its CommWorks assets, with the revenues from these sales expected to be plunged back into R&D efforts.

“We have sold off some of the majority assets of CommWorks, but we have retained large access to the intellectual property. By investing the assets of CommWorks it’s a proof point that we are absolutely increasing our focus on the enterprise market,” comments Ceronie.

In light of Huawei’s ongoing dispute with Cisco over intellectual property infringements, both 3Com and Huawei have gone out of their way to emphasise their stance on such patents and affirm that any joint venture products will be free of any such claims.

“The assurance that we have given to our partners and our customers is that the products sold by the joint venture and 3Com going forward will be free of any patent or copyright infringements,” says Ceronie.

At a local level, 3Com is likely to retain responsibility for sales and services in the region for any joint products and ventures. Moreover, Ceronie believes the Middle East is a key target market for these products and suggests that the joint venture will provide a boost to regional channel partners.

“Our business is doing incredibly well in the Middle East and by broadening our product portfolio and offering our channel more opportunities and better margins, the Middle East springs to mind immediately as a market that will benefit from this particular strategy very, very successfully,” he comments.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code