3Com SA behind closed doors

Johannesburg, 01 Oct 2007

3Com's global announcement that it would be bought by private equity firm Bain Capital has been met with silence on SA's shores.

On Friday, 3Com SA's parent said the $2.2 billion deal would also give China's Huawei Technologies a minority stake in the firm.

The announcement comes six months after Huawei sold 3Com its 49% share of their joint venture, H3C, which was set up in 2003 to pool research and development, reports Reuters.

ITWeb made several calls to 3Com SA this morning. However, no comment has been forthcoming on what impact the deal could have on the local operation. The people believed to have the power to comment have been in meetings, said the company's receptionist.

Long time coming

Last year, ITWeb sister publication Brainstorm carried an article which suggested a sale may be on the cards.

In the report, columnist Paul Booth noted that several moves to address the company's declining profits had failed to deliver the required results.

"Today, if reports carried in reputable publications such as The Wall Street Journal are to be believed, 3Com's future is in doubt. It would appear that Huawei Technologies has invited three private capital companies that are no strangers to the hi-tech world, Bain Capital, Silver Lake Partners and Texas Pacific Group, to buy a majority interest in the H3C joint venture," said Booth.

Pointing out that H3C represents about half of 3Com's then revenue, Booth noted that without its contribution, 3Com would be left with little more than a pile of cash and a few networking assets.

On the other hand, Huawei Technologies is viewed as a legitimate and major player in the networking space and a major threat to Cisco, he explained.

"All indications are that Huawei will still retain a shareholding in H3C following any private equity buyout, which may be as much as 30%. Regardless, the end result could mean curtains for 3Com," concluded Booth.

3Com and Bain hope to complete the transaction in early 2008.