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Eric Benhamou & the Turnaround of 3Com (Part 18)

Posted on Thursday, Sep 6th 2007

To conclude an extremely interesting interview, here is a final, reflective segment with Eric. We will continue the story of Palm separately, later in September, once Palm’s shareholder vote for the Elevation Partners deal is completed.

SM: You have watched what happened since then. What lost 3Com the position you were in at the end of the 20th century? EB: I honestly believe it was just one bad decision. I don’t think it has been fatal, but it was clearly a bad decision which set us back regardless.

In addition, the restructuring which was done afterwards, was done too much based on a paper analysis; once again, the spreadsheet jocks running the company as opposed to the people who have a feel for the business. We let the wrong people go, the people who understood how to build great networks, develop the algorithms, build the elegant architectures.

SM: Did they leave because they had made too much money? EB: We did not send them the right signals. We essentially told them the bottom line was what mattered now, and you had a sense the place was no longer run by the same norms.

That happens often when you have CEO transitions. Bruce had a very different style than I did. Mostly, Bruce did not value the same things as me. When I walked down the hallway and came across a great engineer who created really brilliant things, I spent time with him. Bruce could not care less. He could not detect that type of engineers. That was the difference.

If I could summarize the core skills 3Com had from the inception, it would have to be said that 3Com has had great engineers and the best products in the industry. To this day we have the largest patent portfolio in the networking industry because of our core mass of technologists. On the other hand, Cisco had a great sales force, the best in the industry.

SM: 3Com has done precious little with that brilliant patent portfolio, and Cisco also did a very good job with acquisitions. They acquired small companies early, integrated them well, and put them in the channel. EB: We did this as well. We acquired 25 companies and integrated them very well. We acquired one large one that perhaps we should not have, but the rest were in the same style as Cisco and we started this very early.

What ultimately hurt us was losing what made us successful. We didn’t have this craving to innovate and do things better anymore. When we lost that, we lost. Steve Jobs calls it the hunger to make insanely great products. We had that, and we do not have it today.

We have something else in our Chinese operation, there is a similar hunger to succeed, but it is not driven by elegance and architecture or intellectually powerful ideas. It is a different game today. The things that made us successful in the 90’s are what we have lost today. Now we have to use very different strategies.

SM: Like hugely undercutting Cisco on price, while not getting blindsided by yet another technology shift. Eric, it has been a pleasure. Let’s take a break, and we shall continue with Palm in a week or so, once you are done with the shareholder voting.

Analysis: Meanwhile, discerning readers may check my prior article on 3Com’s opportunity to leverage its patents.

[to be continued with Palm]

[Part 17]
[Part 16]
[Part 15]
[Part 14]
[Part 13]
[Part 12]
[Part 11]
[Part 10]
[Part 9]
[Part 8]
[Part 7]
[Part 6]
[Part 5]
[Part 4]
[Part 3]
[Part 2]
[Part 1]

This segment is part 18 in the series : Eric Benhamou & the Turnaround of 3Com
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[…] billion compared to Cisco’s $34.9 billion in 2007, it is a mere shadow of its former self. My interview with Eric Benhamou analyzes what went wrong at 3Com. 3com’s exiting the high-end enterprise business turned out […]

Online Video Beneficiaries: 3Com? - Sramana Mitra on Strategy Tuesday, September 11, 2007 at 4:56 AM PT

Good article.

I would say there were several key parts of 3Com’s story that were underdiscussed:

1) 3Com’s reliance on NIC’s. From the mid-80’s through the 90’s a dominant portion of 3Com’s revenue and profits were derived from the NIC card business. The end of the NIC was forseeable and 3Com had 10-15 years to replace this revenue steam – something they were never able to do.

2) The US Robotix merger was a disaster in many ways. You mention the turmoil it caused in strategy but it also defocussed the previously efficient operations strategy. In som many ways that was the wrong merger at the wrong time – as many “mergers of equals” turn out to be.

3) The abandonment of Silicon valley. In the late 1990’s/early 2000’s 3Com abandoned Silicon Valley for Boston. This caused many of the most highly talented people to leave at both the senior executive and key contributor level. The hope of gaining its technical edge died with the move.

AppleJack Friday, September 21, 2007 at 11:35 AM PT

There are many inacurracies in this blog. It is a self serving revisionist history of what really happen and why. I was involved through the 1980s and early 1990s. While Eric did many things right his tenure as CEO and as Chairman has resulted in the continuing decline of 3Com

Ted Smith Wednesday, September 26, 2007 at 3:18 AM PT

Ted,

Instead of attacking people personally, I always encourage readers to provide concrete facts and data. Thus, it would be far more constructive to make your case with evidence that objective readers can draw their own conclusions from.

Thanks, Sramana

Sramana Mitra Wednesday, September 26, 2007 at 10:59 AM PT

Excellent interview. Well done.

Jeff Matthews Sunday, January 6, 2008 at 9:41 AM PT