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3Com says Huawei JV gets OK
( 2003-11-18 09:13) (Agencies)

Network equipment maker 3Com Corp.said on Monday it has received approval from the Chinese government for a joint venture with Huawei Technologies Co. that analysts expect to challenge No. 1 network gear maker Cisco Systems Inc., especially in China.

Huawei-3Com Co. will be based in Hong Kong, have its principal operations in Hangzhou, China and have sales offices throughout China and Japan for marketing networking gear such as routers and local-area-network switches, according to Marlborough, Massachusetts-based 3Com.

The joint venture, announced in March, will sell its own products along with 3Com products in China and Japan, while 3Com has rights to market and support the joint-venture's products under its brand in other countries.

3Com has shifted its focus to the so-called enterprise market, made up of corporations, government agencies and large institutions, such as universities. Their spending on networking gear for managing online traffic has been healthier than equipment spending by telecommunications carriers.

Analysts said the joint venture's goal is to grab some of Cisco's large share of the network equipment market by offering resellers better margins.

"The whole idea behind the 3Com Huawei partnership is to develop a product line attractive to resellers," said William Becklean of Oppenheimer and Co.

"Cisco owns the market. They have a 70 percent share," Becklean said. "The only chance that the second-tier competitors in my opinion have is finding access to a distribution channel that gives them a niche market."

Shares in 3Com traded down 18 cents, or 2.5 percent, at $7.05 on Monday afternoon on Nasdaq.


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