3Com Scraps Broadband Consumer Modems
By Jeff Baumgartner -- Multichannel News, 6/8/2001 6:54:00 AM
3Com Corp. said Thursday that it has scrapped its line of consumer cable and digital-subscriber-line modems as margins continue to spiral downward and a glut of vendors continue to enter the sector.
Shopping those businesses to other manufacturers is 'not an option,' 3Com spokesman Brian Johnson said, noting that the company will continue to market cable- and DSL-modem products to the commercial sector.
CommWorks Corp. -- a 3Com unit that makes DSL-network routing equipment and cable-modem-termination systems -- will continue to operate, Johnson said. 'All we did was shut down a couple of product lines and apply [those resources] into an area that has a better rate of return,' he added.
At the end of last year, 3Com held the No. 2 Data Over Cable Service Interface Specification cable-modem market position, behind Motorola Broadband Communications Sector, according to Gartner Dataquest figures.
Still, 3Com simply wasn't 'making any money' with its broadband consumer products, Johnson said.
That's partly because cable-modem margins are in a free-fall, dropping below 10 percent and as low as 5 percent in some cases. Almost every cable-modem vendor has dropped prices below $100 per unit, an industry source familiar with the situation said.
3Com also updated guidance for the fourth quarter of fiscal-year 2001, which ended June 1. The company said it expects revenues to range from $450 million to $475 million, citing lower sales volumes and increased provisions for excess inventories. 3Com will announce fourth-quarter results June 26.
3Com's decision to bug out of the sector comes as no big surprise. CEO Bruce Claflin told analysts this year that shrinking margins had prompted the company to have second thoughts about staying in the broadband-modem business. Multichannel News reported that May 14, citing Gartner Dataquest broadband communications senior analyst Patti Reali.
3Com's MSO customers include AT&T Broadband, Charter Communications Inc. and Classic Cable Inc., among others. 3Com said it will honor past agreements to ensure that its network operators 'have a soft landing,' Johnson said.
In addition to selling cable modems directly to operators, 3Com also distributed the gear via retail channels, including Cablevision System Corp.'s chain of The Wiz stores.
Cablevision and The Wiz said 3Com's decision would not impact future plans.
'We expect that 3Com Corp. will continue to honor all end-user warranties in accordance with their terms, and it has ensured a commitment to providing support through the transition,' said Gemma Toner, Cablevision's senior vice president of high-speed-data products, in a prepared statement. 'All Optimum Online customers with 3Com modems will continue to receive a high level of customer-service support.'
A spokeswoman for The Wiz said its chain of stores also sells cable modems from Motorola Broadband and Terayon Communication Systems Inc., and it is still offering 3Com models.
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