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January 27, 1998

3COM AND NEWBRIDGE STRENGTHEN ALLIANCE

By CBR Staff Writer

3Com Corp and Newbridge Networks Inc’s strategic alliance, announced on Monday, may be just that: the beginning of a deliberate technology grouping that means business, rather than a marketing maneuver that the datacommunications market is so used to. Newbridge gets out of a business that it has failed in – the fated LAN Vivid product line that its acquisition of UB Networks Inc was meant to bring to market – on the back of exposure to the colossal 3Com customer base. 3Com in return gets to join, as a full partner, the fruitful Wide Area Network alliance that Newbridge has forged with Siemens AG. With this comes a long anticipated entry into the telecoms equipment market. It will resell Siemens/Newbridge’s joint developed MainStreetXpress 36170 WAN ATM switches, although, at present, it says it will only sell the equipment to its enterprise customers – leaving the carrier market to Newbridge. In addition, 3Com also gets to fill some LAN product line gaps. The alliance – by joining Siemens, the sixth largest telecommunications equipment vendor; and Newbridge, a significant WAN company; and 3Com, which has built its networking business up around LAN equipment – could prove to be an alliance that seriously challenges Cisco Systems Inc’s position as largest networking vendor. However, neither Newbridge nor 3Com would give any financial details of the alliance which was announced alongside Newbridge plans to refocus on the enterprise end of the business. It is not yet clear, for example, how much Newbridge will pay to jettison troubled Ungermann-Bass Networks business. 3Com would give no date for releasing the financial details of the deal but according to Newbridge it will be made public when it reports its third-quarter results February 24. The new deal builds on a tie up agreed last October between all three vendors in the Carrier Scale Internetworking initiative, which aims to integrate network management, Internet Protocol packets routing over the WAN and existing telecoms equipment. In October, a Siemens executive commented that it was difficult to bring 3Com and Newbridge to a table, as Newbridge is worried about 3Com’s competition in the LAN market. Now things are different for Newbridge, which has seen revenues in the LAN business fall from $86m a quarter when UB was a division of Tandem Computer Inc, to $45m a quarter for the renamed with new technology bearing Vivid division. The $94m acquisition of UB Networks Inc in January has proved a failure. Originally the purchase was for the UB sales channels, which backfired and left Newbridge debating whether to get out of the business altogether. Newbridge, a minnow in the LAN world, it is likely to become dominated by 3Com, with 3Com using Newbridge’s switch routers to fill out its product line, and the integration of the two lines will be complete when 3Com brings the Vivid network management software NetDirector into its TranscendWare software suite. According to 3Com, work to join the two technologies has already begun and should be completed within six months.

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