One company’s distraction is another’s cross-selling opportunity.
3Com Corp. sold off assets from its CommWorks division to China-based UTStarcom. Starcom specializes
in wireless and wireline access and IP switching solutions, while CommWorks focusses on carrier-focused voice and data products.
“”There is virtually no product overlap. The transactions includes patents and the rights to all intellectual property related to the CommWorks products,”” Michael Sophie, CFO and vice-president of finance of Starcom, said in a conference call announcing the transaction late Tuesday.
“”Because our products are services are complimentary the purchase will almost double our market opportunity through customers geographic and product diversification,”” added president and CEO Hong Lu.
Sophie said the deal is for US$100 million with no assumption of debt. Both boards have approved the sale and are now waiting for regulatory approval. The deal is expected to close in the second quarter.
On top of its technology, CommWorks is also provides services. Sophie said products account for 50 to 60 per cent of its revenue and the remainder is derived from global customer support and professional services organization. He said he expects the additions will deepen its relationship with customers and provide new revenue opportunities.
Hong predicted the integration of two companies will go smoothly (CommWorks office in Illinois will remain open) and customers should be unaffected. Canadian customers include Nortel, Ingram Micro, Bell Canada, Telus and Celestica. 3Com Canada president Nick Tidd agreed.
“”What’s important for all of those customers is that their platform is not changing, nor is the direction of the company. In fact, Starcom will give them the ability to enhance the offering,”” Tidd said, adding the product portfolio centres around 2G wireline and wireless and Internet access.
The party line of the sale of the assets is it allows 3Com to “”be more focused than ever, strategically setting our sights on what it will take to be the tier one networking company of the future,”” Tidd said.
“”The CommWorks business as a whole for 3Com represented about 10 per cent of our worldwide business. Specifically here in Canada, while they’re marquee customers it certain not going to have much impact.””
A Bell Canada spokesperson said it was too early to tell if and how the sale will affect the telco.
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