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Eric Benhamou & the Turnaround of 3Com (Part 10)

Posted on Wednesday, Aug 29th 2007

3Com started growing revenues again in 1992 on the strengths of new products. The company grew about 15 fold in a decade, in terms of revenues, and became profitable again.

SM: That was a golden age in networking! EB: Yes, and shareholder value went from the million range to billion range. It was fun, because we felt our products were being used by all kinds of people all over the world to make fundamental changes. They were strategic instruments of change across all countries and industries. This was before the world discovered the internet.

SM: Cisco was also building itself during this timeframe, and you guys were going neck to neck. What were some of the key points of that competition, and what are the things that they did right and wrong? EB: It was not yet a duopoly of Cisco / 3Com, it became that in the second half of he 90’s. In the early 90’s it was a broad field of play – lots of companies. It narrowed down to 4 in 1994; us, Cisco, SynOptics/Wellfeet (which formed Bay Networks), and Cabletron. These companies pulled ahead of the others, who were absorbed.

We were the first ones to realize the market was going to grow faster than any one of our abilities to follow it unless we made acquisitions; as such we were the first to make acquisitions. My first was a bold one because it was not in Silicon Valley. I acquired a company in Europe in part because we did not have the currency to buy a Valley company, but also because I wanted to create a global business. It is not enough to have a few sales offices overseas, you need to have a presence there; to build products, to have a source of market inputs. We bought BICC Data Networks at the end of 1992 at the same time we were launching new router products.

SM: What prompted that acquisition? EB: They had hubs. Hubs were basically how networks were implemented locally around structured wiring. Ethernet started off as a yellow cable that snaked across ceilings and floors, and then it became twisted pair. You needed to have a hub and structured wiring systems similar to the local phone wiring, and we did not have this capability.

When you build repeaters, which is the electrical function of hubs, you need expertise and they had that expertise. With them on board we could compete with SynOptics. We were the first ones to envision that networks had to be built out of a few core building blocks that included switches, hubs, routers, and communication servers. You also needed some network management tools in order to manage it all. For the better part of the 90’s I had to explain to our investors that these were the core building blocks of networks, and that you needed them to build ANY network. We were the first ones to have all of those in-house through acquisitions. Cisco was only about routers. This gave us a positioning lead, because we could solve overall networking problems.

[to be continued]

[Part 9]
[Part 8]
[Part 7]
[Part 6]
[Part 5]
[Part 4]
[Part 3]
[Part 2]
[Part 1]

This segment is part 10 in the series : Eric Benhamou & the Turnaround of 3Com
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