3Com Uses China to Challenge Cisco

3Com is taking its China-based H3C subsidiary global.
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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) - Get Report

'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) - Get Report

. H-P, in turn, is ramping up its own networking efforts through the company's ProCurve offerings.

"We don't want to comment on what Cisco will or won't do, but we think there's tremendous value in focusing on enterprise networking," said Sege. "We don't believe that have we to build servers to solve customer problems."

There is, however, plenty of competition in this space, with

Juniper

(JNPR) - Get Report

and

Voltaire

(VOLT) - Get Report

also pushing their

networking agendas

.

3Com must also contend with the downturn in enterprise IT spending, as evidenced by the firm's third-quarter sales, which slipped from $336.4 million to $324.7 million, well below analysts' estimate.

Sege says that the company has been building out its sales and support business for the expanded H3C, but was unwilling to reveal how many early adopters are using the technology.

Shares of 3Com slipped 6 cents, or 1.5%, to $4.04 Monday, as tech stocks slipped 0.45% on the Nasdaq.