March 3, 1997 10:00 AM ET
3Com-USR: Big step in Net access battle
By Scott Berinato and Stacy Lavilla

  The pending merger between 3Com Corp. and U.S. Robotics Corp. represents a bold stride to make remote access a fundamental part of enterprise networks.

The $6.6 billion merger between 3Com, which has carved out success in the network adapter and workgroup switch markets, and U.S. Robotics, the leading dial-up modem vendor, creates a compelling option for corporate sites looking to better integrate their local and remote users.

"One-stop shopping is fairly important to us. It's easier to deal with a single vendor as often as you can," said Michael Hartness, network services manager at Sun Trust Banks Inc., in Atlanta. "It certainly eases the transition of remote users to the network arena."

3Com, with its 10/100M-bps adapter and ATM (asynchronous transfer mode) switch technology, and U.S. Robotics, with its remote-access servers and modems, want to leverage their respective products to provide faster network access.

"We want to create products that address next-generation applications, where sending packets blindly won't cut it," said Ron Sege, vice president of 3Com, based in Santa Clara, Calif. "Dedicated bandwidth applications will require new products, and we're coming from the edge of the network in, while most are going the other way."

Combined development efforts will include 56K-bps dial-up technology--as soon as the companies resolve a potential point of contention over which 56K method to support (see below)--and DSL (digital subscriber line) technology, which promises data transmission speeds of 1.5M bps downstream and 640K bps upstream.

"You've now got a 500-pound gorilla that could speed the deployment of DSL," said Kieran Taylor, broadband consultant at TeleChoice Inc., in Verona, N.J.

3Com also could extend its Transcend network-management software to U.S. Robotics modems and remote-access servers, providing more centralized administration for LANs and WANs.

"From the management perspective, there's a good possibility this will make my life a lot easier," said Russ Atkin, a consultant to the city of Saskatoon, Saskatchewan. "If we can have Transcend go one step further and give us management capabilities over our Courier [modems], that would be great."

The merger comes as both companies are feeling competitive pressures. 3Com is engaged in a price war over network adapters, while U.S. Robotics is in a bitter battle to gain control of the evolving 56K-bps modem market. By combining their forces, the companies hope to better play off each other's strengths.

"The enterprise area is not Robotics' game, and that's where the bandwidth demand will be," U.S. Robotics CEO Casey Cowell said at a press conference here last week.

On the other hand, "U.S. Robotics is years ahead of us in their channel strategy," 3Com CEO Eric Benhamou said. "Instead of developing the remote access side, we can now feed their machine with 3Com [adapters] and other products."

The merger, expected to be completed by May 31, doesn't help 3Com's product offerings at the core of enterprise networks: high-end routers, a category currently dominated by Cisco Systems Inc.

"3Com has not been as successful in remote routing or high-performance routing," said Fred McClimmans, CEO of Current Analysis Inc., in Ashburn, Va. "The merger allows them to apply a surround-and-conquer strategy [against Cisco]. They'll work to become the remote access provider and interface into the core network."

For remote users, who are often an afterthought for network administrators, the 3Com-U.S. Robotics pairing could turn into a major blessing.

"Everything in the LAN is being pushed out of the glass house into homes, remote offices and hotels," said TeleChoice's Taylor. "This merger could effectively join what's in the house and what's outside it."

Merger will force 56K-bps decision
The blockbuster merger between 3Com Corp. and U.S. Robotics Corp. has produced one awkward situation that will demand a quick resolution.

The Open 56K Forum, of which 3Com is a founding member, includes Rockwell Semiconductor Systems Inc. and Lucent Technologies Inc., creators of the K56Flex technology. Conspicuously absent from the group is U.S. Robotics, which is pushing its own x2 technology as a standard.

But in the euphoric aftermath of the merger announcement, both sides vowed to bridge the apparent schism.

"It would be inconceivable" that 3Com would not embrace and support its x2 modem technology, said CEO Casey Cowell of U.S. Robotics, in Skokie, Ill. "There's no way that they will not support x2 technology."

"We have to support x2," said Ronald Sege, senior vice president of LAN operations at 3Com, in Santa Clara, Calif. "So the question is how to figure out how to rationalize support for x2 with open standards."

Sege said 3Com is considering a role as mediator that could bridge the gap between x2 and the group of companies banding behind the Open 56K Forum.

At the same time, 3Com and U.S. Robotics also might be able to find a technical issue that addresses the issue of interoperability between modem technologies, he said.

The stakes are high. Analysts expect the modem business to break the $5 billion mark some time this year.

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