3Com lays down gauntlet to Cisco

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3Com has claimed its challenge to Cisco's dominance of global networking hardware sales is market ready with a range of switches that complete its product arsenal - the latest from a quadrupled R&D investment that has resulted in 160 new products this year and 240 more promised for 2005.

3Com has claimed its challenge to Cisco's dominance of global networking hardware sales is market ready with a range of switches that complete its product arsenal - the latest from a quadrupled R&D investment that has resulted in 160 new products this year and 240 more promised for 2005.

Pax Andersson, vice president of international sales and service at 3Com, said the 8800 range of 10 Gigabit switching for large enterprise cores completed 3Com's portfolio, finally giving the vendor its chance to tackle Cisco head on in the enterprise space as well as in SMBs, where 3Com has long been strong.

The modular 8800 range of switches boasts a 1.44 Terabit backbone, wirespeed, load-sharing fabrics and on-board layer 2 and layer 3 switching. The range is modular, and - fitting in with 3Com's strategy of targeting interoperability - open standards compliant. The 8800s complement the recently announced 7700 distribution switch family.

"The 8800 range is the [Cisco] Catalyst [range] killer, the biggest core switch today." he said. "Cisco has nowhere to hide, so to speak. We're now presenting 3Com solutions in every area."

Andersson said the 8800 range was harvest from 3Com's US$160 million joint R&D venture with Chinese vendor Huawei. The Huawei joint venture was part of a quadrupled investment in R&D by 3Com that included new development centres in Taiwan, India and China.

The Huawei joint venture in China had grown from an initial 700 staff a year ago to 2600 today, including 1200 engineers. "It's accelerating," he said.

However, Andersson wouldn't put a dollar figure on 3Com's total R&D investment, a strategy decided on two years ago with the stated aim of expanding 3Com into the enterprise as well as the SMB - challenging market leader Cisco in the process. However, he did say it had quadrupled in two years.

"We won't say exactly how much it is. But I will say that we are taking a calculated business decision to make sure we launch at a competitive level and we need that level of investment," he said. "In open standards, converged networks, 3Com will be the biggest company."

Andersson sidestepped calling Cisco's dominance of the market a monopoly but argued that Cisco's strength had resulted in an "unfair" situation for customers and partners worldwide - especially those selling to medium and large enterprises.

"We think customers and partners around the world are paying US$4 billion too much for their Cisco acquisitions, because Cisco is using its market leader dominance to the customers, and to the channel, making prices too high, squeezing margins to the channel too low and using the fact that Cisco product A can only talk to Cisco product B and Cisco product C and so on," Andersson said.

3Com was making diverse promises that should make its portfolio an attractive alternative to Cisco, particularly for its 42,000 partners globally. The vendor did not sell direct and that wouldn't change, he said.

3Com's offerings had a 20 to 30 percent lower cost of acquisition, 20 to 25 percent lower Total Cost of Ownership and less need for expensively trained and certified engineers to manage the lineup, promising a good return on investment, Andersson claimed.

The 8800 range had been joined this year by 3Com's new Convergence Applications Suite, Enterprise Management Suite (EMS), V3000 NBX IP telephony module, VCX 5.0 IP telephony module and new IP messaging, conferencing and contact centre offerings. 3Com's product ramp-up - which the company said had resulted in 160 new products this year and 240 more to come in 2005 - was funded mainly by its excellent cash position.

"We have US$1.3 billion in cash and no debts. We have not one dollar in debt," Andersson said. "Our cash to cash cycle is negative. God knows how we do it but we are actually getting the money before we spend it."

In the PC-making industry, companies such as Dell could also make that claim, he said, but in networking, no competitor was similarly placed financially. 3Com was turning over its total inventory 17.4 times a year. Cisco was only turning its inventory around seven times a year, Andersson alleged.

Andersson would not say how much the big R&D investment would hit its profits in the coming year. However, he conceded that the most recent US fiscal quarter had netted some US$162 million in revenue and projections for the current quarter, ending 30 November, were flat.

 

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