Home » 3Com – The Company Behind the Early Days of Internet

3Com – The Company Behind the Early Days of Internet

by Maria Caballero
3Com Company History

Founded in 1979 by Robert Metcalfe, Howard Charney, and two others, 3Com Corporation found its success in the computer network products industry. It had its headquarters in Marlborough, Massachusetts, and traded on NASDAQ as COM from 1984 to 2010. The brand’s top products included Ethernet switches, wireless access points, IP telephony products & applications, and routers. The brand also acquired many companies in the same industry, which drove its success in its prime years. 

In late 2009, the multinational information technology company Hewlett-Packard (HP) announced its plan to acquire 3Com for $2.7 billion. HP completed its acquisition of 3Com a year later. When HP Enterprise (HPE) spun off its services business and enterprise products arm in November 2015, it merged 3Com into the company’s Aruba Networks unit. Today, the 3Com brand offers edge-to-cloud platform solutions, security, data storage, networking products, and software services.  

Bob Metcalfe, Company Co-Founder and the Co-Inventor of the Ethernet

Born on April 7, 1946, Robert M. Metcalfe went to the Massachusetts Institute of Technology or MIT, graduating with degrees in electrical engineering and industrial management. He also finished his Master of Science degree in mathematics and Ph.D. in computer science at Harvard. As he was taking his doctorate, Metcalfe worked with MIT’s Project MAC, where he built hardware for linking the institution’s minicomputers with the ARPAnet. 

Later, Metcalfe worked at Xerox PARC, where he fixed the bugs in the AlohaNet model of the University of Hawaii’s ALOHA network. The analysis became his thesis, which led to his earning his Harvard Ph.D. While working at PARC, Metcalfe worked with David Boggs to invent the Ethernet in 1973, one of the first systems for connecting peripherals and computers over short distances.  

Metcalfe quit Xerox PARC after six years to start his own consulting firm. In the same year, he co-founded 3Com in his Palo Alto apartment with Howard Charney, an engineer and patent attorney, with two others. In 1980, the group refocused their company and turned it into a LAN equipment manufacturing firm that used the Ethernet technology Metcalfe had co-created. With Metcalfe’s encouragement, Xerox shared its Ethernet patent with Digital Equipment Corporation and Intel. It led to the establishment of the technology as a LAN industry standard. As a manufacturer, 3Com was a few steps ahead and was already using the Ethernet. 

With Metcalfe’s prediction that the personal computer would become common, the group approached venture firms in California for financial backup. Three venture capitalists contributed $1.1 million, and 3Com used the financing to run a business strategy focused on long-term growth.  

In 1981, L. William Krause, the general manager from HP’s General Systems Division, joined the company as its president, with Metcalfe as its CEO, chairperson, and vice president of engineering. Krause’s intentions of growing the company led to the brand shipping its first hardware product: an Ethernet transceiver and adapter. Because of the novelty of the technology and Krause’s risk-averse management strategy, the lack of sales led to a potential cash flow problem.  

Management Changes and Going Public

Later, the board forced Metcalfe to give his CEO position to Krause while he took on the part of vice president of sales and marketing. The change caused 3Com’s sales to rocket in 1982, shortly after IBM released its 16-bit personal computer. With profits soaring in 1983, 3Com applied for an initial public offering in 1984 and raised $10 million. It went public on NASDAQ and used the ticker code COMS. Another 1984 development was the new software division for creating advanced network software, 3&plus, which the company launched two years later. 

In 1986, the firm also promoted 3Server, a computer designed to function as a network server. 3Com also wanted to manufacture computers to be clients, so it worked with Convergent Technologies Inc., a manufacturer of UNIX-based computers. The merger was canceled two days before the shareholders could approve, per 3Com’s investment banker’s advice. Instead, the company sold systems with personal computer products that operated within the network, called network stations.  

Acquisitions, Mergers, and Joint Ventures

3Com’s marketing products later emphasized workgroup productivity improvement. In 1987, it introduced new software, network servers, and industry-standard network adapter cards. In September that year, 3Com spent $151 million on acquiring Bridge Communications Inc., an internetwork gateways manufacturer. Its devices could connect networks on a corporate level and complemented 3Com’s products well. The merged companies became the largest independent networking manufacturer at the time.  

However, the different management styles and corporate cultures created friction. It took over a year before the company could launch its internetworking products. The same issue echoed in its sales forces, wherein 3Com catered to value-added resellers while Bridge focused on direct sales. The LAN Manager sales suffered from friction despite initiating a Cooperative Selling Program.  

Microsoft Corporation also worked with the brand to create LAN Manager network software for the OS-2 operating system. In 1988, Microsoft marketed its version of LAN Manager called 3+Open. Novell, a competitor of 3Com, marketed NetWare against OS-2, making it less popular. 

Another notable acquisition occurred in 1995 when 3Com bought Chipcom Corporation for $700 million in stock. The stock purchase created the second-largest manufacturer of computer network equipment in the US.  

The New Renaissance Plan

After the company neglected its other sales, Krause executed a “New Renaissance Plan” in January 1990. The firm branded itself as a network integrator and network systems supplier. It had to give up the fight against Novell and NetWare. It also passed off the task of marketing LAN Manager to Microsoft.  

The company became centralized when Krause reduced its divisions to three only: sales, product development, and internal operations. The management also underwent some changes, with Bridge Communications co-founder Eric Benhamou stepping up as the new president and chief operating officer. Metcalfe also resigned, followed by Krause.  

Business Troubles and Scandals: Late 90s Lawsuit

In 1997, the corporation acquired US Robotics (USR), a networking equipment manufacturer based in Illinois, United States. However, two months before the stock swap, when 3Com could seize its new purchase, USR’s stock doubled in value, leading to an additional $200 million gain for the former.  

When information about the alleged incident occurred, a shareholder suit was filed against 3Com Corporation. In 2000, the company announced that it’d settle the action-class suit with $259 million. Consequently, 3Com’s stock  

slumped, costing shareholders $500 to $700 million.  

The Company During the Covid Pandemic

Since 3Com was already absorbed into HPE’s Aruba Networks arm, it likely suffered the same fate as its new parent company when COVID-19 hit. We don’t have data on how 3Com fared during the height of the pandemic, but we can infer from HPE’s pandemic situation. HPE’s annual revenue fell by 7.39% or $26.982 billion in 2020 from 2019. In 2021, the company’s revenue increased by 2.97% or $27.784 billion.  

Where Is 3Com Today?

While it doesn’t place its own brand on its merchandise, 3Com likely sells its products under the HPE brand. HPE’s primary offers revolve around networking, like cloud software, data storage & protection, virtual desktops, and networking solutions. The brand also provides software and computing solutions, often those that complement its cloud-native apps and edge-to-cloud offers. Since 3Com previously sold and manufactured Ethernet switches and gateways, it likely still fabricates the same hardware for HPE’s offerings. The same may apply to its local area network interface cards, routers, and other connectivity products.  

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