3Com-Bain Deal Stalls, but the Door Remains Open
| February 22, 2008 | Enterprise Technology and Software | Competitive Update
| Enterprise Network Systems |
Analyst: Steven Schuchart
| Enterprise Communications |
Analyst: Rob Arnold
| Enterprise Security |
Analyst: Andrew Braunberg
Current Perspective: Negative
Vendor Importance: Very High
Market Impact: Low/Moderate
Event Summary
February 20, 2008 -- 3Com Corporation has announced that the company, along with affiliates of Bain Capital Partners, LLC and Huawei Technologies, has withdrawn the joint filing to the Committee on Foreign Investment in the United States (CFIUS) concerning the parties’ proposed merger transaction. The parties remain committed to continuing discussions.
Analytical Summary
• Current Perspective: Negative on 3Com being unable to complete the transaction to go private with Bain Capital Partners, because Bain could have taken the stock market pressure off of 3Com and given it the autonomy required to pursue strategic initiatives. Bain would have helped to streamline 3Com’s operations and improved its chances of achieving profitability for the first time in years. The deal to bring 3Com private may still complete, but not until 3Com and Bain address concerns the Committee on Foreign Investment has with Huawei’s involvement.
• Vendor Importance: Very high to 3Com, because the transaction with Bain Capital Partners could have signaled a turning point for the company. Without Bain’s backing, 3Com must stay its course in attempting to gain market share in competitive markets such as VoIP, security, WLAN, and switching.
• Market Impact - Enterprise Network Systems: Low on the enterprise network services market, because the cancellation of Bain’s proposal does not change 3Com’s short-term plans. The impact of the Bain acquisition would have had a longer-term effect on 3Com and therefore its competitive standing in the market.
• Market Impact - Enterprise Security: Moderate on the enterprise security market, because this looks to be the second time in recent memory that the U.S. government has blocked a U.S.-based security technology vendor from selling all or part of itself to a non-U.S.-based entity. Given the fairly weak IPO market for security companies, these actions could potentially limit the exit strategies of private security companies.
• Market Impact - Enterprise Communications: Low on the enterprise communications market, because the cancellation of Bain’s proposal does not change 3Com’s short-term plans. The impact of the Bain acquisition would have had a longer-term effect on 3Com and therefore its competitive standing in the market.
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| Client access - Full report in Enterprise Network Systems | More information
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