3Com to Spin TippingPoint Back Out in IPO

| July 2, 2007 | Enterprise Security, Enterprise Network Systems
| Competitive Intelligence Report

| Analysts: Andrew Braunberg, Charlotte Dunlap

Current Perspective: Neutral
Vendor Importance: Very High
Market Impact: Moderate

Event Summary

On June 28th 3Com Corp. announced its intention to execute an initial public offering (IPO) of common stock of its wholly owned subsidiary TippingPoint, a provider of network-based intrusion prevention systems (IPS) and Digital Vaccine attack filter services for enterprises, government agencies, service providers, and academic institutions.

Analytical Summary

• Current Perspective: Neutral on 3Com's decision to spin out its wholly owned subsidiary, TippingPoint, because the move is a gamble financially and strategically at the highest levels (i.e., what markets to play in and how to ensure attractiveness to channel and technology partners).

• Vendor Importance: Very high to 3Com, because this announcement signals a major change in direction for the company strategically and it demonstrates that 3Com is willing to "walk its talk" with respect to its seriousness in promoting 3Com Open Services Networking as its long-term corporate vision.

• Market Impact: Moderate on the threat management markets, because the combination of 3Com and TippingPoint was never more threatening than TippingPoint alone. 3Com did not pull TippingPoint into the SMB market and TippingPoint had limited success pulling 3Com up into the enterprise. The biggest impact on security competitors is that a standalone TippingPoint will need to make some key technology acquisitions quickly.

Recommended Competitor Actions

• 3Com competitors should question the company’s commitment and competency in delivering security solutions to its networking customers. Competitors should suggest that 3Com is too distracted with geographic expansion to keep up with the fast-moving security markets anyway.

• Competitors such as Sourcefire should point to industry talk suggesting that 3Com is not so much interested in an IPO as scouting for a buyer for TippingPoint.

• IPS competitors, including Cisco, Sourcefire, IBM/ISS, and McAfee, should be pleased at the news of a TippingPoint IPO, so they can finally look at the company’s revenues as an indicator of how well they are doing.

• IPS providers should continue to differentiate themselves through the integration of advanced security technology such as network behavior anomaly (NBA). TippingPoint has partnered with two leading NBA providers, while IBM/ISS partners with NBA provider Arbor.

• Juniper has been fairly quiet in the IPS competitive landscape and it needs to become more vocal about its IPS strategy (and Symantec’s role in those efforts) and its plans for advanced technologies and differentiators.

Recommended End User / Customer Actions

• Existing 3Com customers should be neutral on this announcement. For the immediate future, nothing will change for customers, the IPO will not be completed until the end of 2007, and 3Com will retain a majority interest in TippingPoint for the foreseeable future.

• TippingPoint customers should also be neutral on this announcement. While an IPO carries risks for 3Com, because it will remain the majority owner for the time being, there is limited risk to end users. Additionally, TippingPoint can now quit diverting resources to 3Com integration projects and focus again exclusively on security.

• Prospects should continue to consider both 3Com and TippingPoint products, but they should view TippingPoint as effectively a separate entity going forward.

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