Under terms of the offer, which has been accepted by the 3Com board, shareholders will receive $5.30 for each share, a premium of 44% over its closing price on Thursday.
3Com CEO Edgar Masri said the agreement will better position 3Com to establish itself as a global networking leader.
Jonathan Zhu, a Bain Capital managing director in Hong Kong, said 3Com has a strong competitive position. We believe there are significant opportunities to grow by acquiring customers and introducing new products, he said.
From peak revenue of $5.4bn in 1997, 3Com’s sales fell every year at a time when the products it supplied were in huge demand as corporate buyers equipped themselves for a revolution in communications.
It last made a profit in 2000 and has been burning money ever since. Revenue had fallen to $3.7bn by 2000 and spiraled to a low of $651m in 2005.
The decline of the Marlborough, Massachusetts-based company was arrested with the establishment in 2003 of the H-3C joint venture with Huawei in China. This transformed 3Com’s operations and broadened its product line both at the low and high end of the market, and enabled it to offer a complete range of products from the edge to the core of the network.
By the last financial year, which ended on June 1, revenue was up 59.5% at $1.26bn though the company still made a net loss of $88.6m.
Huawei and 3Com had the right to an auction to buy each other out of H-3C and it was a surprise that Huawei, which has ambitions to be a major global player, was happy to see 3Com pay $882m for its 49% stake in November 2006.
Our View
An end to 3Com’s independent existence has been long delayed. Huawei is undoubedy in the right place to inherit its assets. While China has been usually been seen as a source of inexpensive manufacturing, it is producing canny management talents and can supply something 3Com has lacked.
