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.
