3 March 2008
by Alex Scroxton
The withdrawal of the joint $2.2bn bid for 16 per cent of 3Com by Chinese networking vendor Huawei and VC firm Bain Capital does not mean the deal is off.
In a statement released to MicroScope by 3Com, the vendor expressed its disappointment with the findings of the US Committee on Foreign Investment (CFIUS), but added: "The parties (Bain Capital, Huawei and 3Com) remain committed to continuing discussions and working closely together to try to construct alternatives that would address CFIUS’ concerns."
"The fundamental drivers that made Bain interested in acquiring 3Com remain in place," the statement added.
Meanwhile, Huawei rejected the claim that the bid’s failure was prompted by American security concerns, pinning the blame on "the complexity of the acquisition process, increase in acquisition costs and significant change in stock market conditions since last year".
EuroLAN managing consultant Keith Humphreys believed the deal would never have got approval unless 3Com had made good on its promises to float its intrusion prevention specialist subsidiary, TippingPoint, which was on the cards when the initial approach was made. TippingPoint had previously dealt extensively with the US government.
"I think 3Com used TippingPoint as a negotiating point in a way that was rather naive," Humphreys added. "If 3Com gets on and IPOs TippingPoint I would have thought they’d have every chance of being able to renegotiate with the US authorities."
One reseller suggested Huawei would almost certainly not take its failure as a complete rebuff, and either refine its bid, or look for other opportunities in Europe or the US.
"The name Huawei is here and the product is good, but you don’t see it publicised, and any partner programme is virtually invisible," he said. "Getting brand recognition out there is frustrating, and maybe that’s why Huawei was looking west."
But regardless of whether Huawei was seeking out a ready-made channel or not, in the security-conscious US, handing over a major communications firm to a communist country was never going to be an easy pitch.
Some in the channel argued that 3Com’s misfortune was the culmination of a succession of mistakes dating back to 2000, when the firm ditched its enterprise business without warning.
One former 3Com partner was still disgruntled eight years down the line.
"In 2000 it was Cisco, Nortel and 3Com, and 3Com’s biggest mistake was to remove itself from the enterprise space and go after the SMB market," he said. "It completely alienated itself from its core customers overnight, and some resellers and partners went under, because we only had four weeks’ notice."
An ex-employee blamed the exit from the enterprise market as the main reason for the current position of the vendor. "A decade ago it was really giving Cisco a challenge."
