COMPUTER network equipment maker 3Com is ramping up operations in Asia as the region becomes its major market after the completion of the deal to acquire Huawei Technologies' stake in its joint venture, Huawei-3Com (H3C).

Speaking to BizIT, 3Com's president and chief executive officer Edgar Masri said with the acquisition of the 49 per cent H3C stake held by Huawei for US$882 million, 3Com's Asia sales have risen to around 42 per cent of total combined revenue of H3C and 3Com.

The H3C deal was finalised in November 2006 and final approval from Chinese regulators is expected by April, he added.

'The share of Asia in 3Com's total revenue pie is expected to increase to over 50 per cent in the near future,' he said. He added that the H3C buyout will position 3Com as the No 2 networking equipment provider in most markets in Asia.

IDC market share data for switches and routers for the third quarter of 2006 in the APEJ (Asia Pacific, excluding Japan) region shows that H3C had 6.1 per cent share of the market while 3Com had 1.4 per cent. The combined 7.5 per cent market share was marginally higher than the market share of second placed Huawei's (separate from H3C) 7.1 per cent. Cisco was the market leader with 52.8 per cent market share.

'The combined 3Com/H3C company will have 6,200 employees, of which 4,500 would be in China alone,' Mr Masri noted, adding that with other regional employees 3Com would have around 4,800, that is 77 per cent, of its workforce in Asia.

In its fiscal second quarter which ended November, 2006, 3Com (incorporating H3C) reported revenues of US$333 million.

Out of this, 3Com contributed US$167 million while the rest came from H3C. Almost 75 per cent of H3C's revenues are generated within Asia, with as much as 70 per cent coming from China.

Mr Masri said the integration has given 3Com the ability to offer a comprehensive range of products to meet needs at different levels.

'For example, in the area of video solutions, the China team has already built these products, giving 3Com a lead over competition.'

In addition, 'we are looking to present customers with best of breed networking solutions and we would like to project ourselves as a clear alternative to Cisco. This is what the H3C acquisition will help us to do'.

Mr Masri said the acquisition has allowed 3Com to 'reduce if not eliminate its losses and let the company move internally from losses to a profit'. In the company's second quarter, 3Com's net income loss was US$3 million, down sequentially from US$14 million in the previous quarter.

The 3Com CEO noted that while China, Japan and India were growth markets in the region, Singapore will continue to remain the company's major hub and Asia Pacific headquarters in the foreseeable future.

The company's Asia Pacific's vice-president and general manager, Peter Chai, who is based in Singapore, told BizIT that the Singapore office had around 75 people and the Republic was a major logistics hub. 'All the (equipment) shipment from Taiwan, US, Mexico or China come to Singapore first and is then re-shipped to customers,' he said.

3Com has been focusing mainly on the small and medium-sized enterprise (SME) market in Singapore to date, Mr Chai added. 'We are now taking a concerted effort to get into the enterprise market,' he said.

3Com is also interested in government and government-linked companies. 'If you look at Singapore, a lot of spending comes from government-linked companies,' Mr Chai noted.

The company has gained some traction from the Wireless@SG initiative and is working with iCell Network in its meshWiFi network in Singapore.

Apart from this, 3Com has been selected as one of the vendors for a Ministry of Education project to supply networking equipment to schools.

Among 3Com's customers in Singapore are SingPost and Daikin, Mr Chai added.

Talking about 3Com's operations in Asia Pacific, 3Com CEO Masri quoted IDC to say that the networking equipment market, which was estimated to be worth US$7.2 billion last year was expected to grow to more than US$8 billion this year. 'Growth will continue to come from Voice over Internet Protocol (VoIP), broadband, IP services and others,' Mr Masri noted.

'By leveraging on the integration of H3C, 3Com can increase its market share and mind share,' he added.

China and Japan are major markets for 3Com. He also noted that most of the world's emerging economies are in Asia, for example, India.

'We have two design centres in India and we plan to improve our presence there. This is because while China continues to be a great base for hardware and network infrastructure development, India is a powerful area for us in software development.'

Mr Masri added that the company's VoIP capabilities were developed out of India. 'A lot of our wireless switching capabilities originate in India and we are looking at a combined sales and R&D opportunity in that country.'

The 3Com CEO said that as the importance of Asia grows for the company, its top executives, including himself, would be spending more of their time in this region.

This article first appeared in BT on March 19, 2007