3Com Uses China to Challenge Cisco

Computer equipment maker 3Com(COMS) is looking to exploit the recent turmoil in the networking sector by expanding its Chinese H3C subsidiary into the rest of the world.

Initially founded as a joint venture with Huawei in 2003, 3Com took sole control of H3C in 2007. Timed to coincide with China's economic explosion, H3C brought in revenue of about $550 million during the first three quarters of 3Com's current fiscal year, which equals more than half of the firm's total sales.

H3C helped the Marlborough, Mass.-based firm beat Wall Street's profit estimate in its recent third-quarter results, underlining the subsidiary's potential. 3Com already sells its own networking products to small and medium businesses, as well as security offerings from its $430 million acquisition of Tipping Point, and is now looking to fill out its product line.

"These products coming out of China are targeting large enterprises," Ron Sege, the 3Com COO, told TheStreet.com explaining that the firm is already selling its wares to French rail giant SNCF. "We can grow significantly in other parts of the world without having to diversify in somewhat unrelated businesses."

H3C sells more than 100 networking devices into the Chinese market, including wireless LAN offerings and high-end core routers and switches. 3Com also unveiled two new switches today, which it will sell worldwide, and revamped its distribution strategy.

3Com's move comes at an interesting time in the data center arena, which is still reeling from Cisco(CSCO)'s entry into the server market. The networking giant's decision to launch its Unified Computing System (UCS) amounted to a direct challenge to the company's long-time partner Hewlett-Packard(HPQ). H-P, in turn, is ramping up its own networking efforts through the company's ProCurve offerings.