3Com Corporation: Forget Cisco, Think Open Source

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Includes: COMS, CSCO
by: Joe Panettieri

If you're focused on Bain Capital Partners' buyout of 3Com (COMS), I have only two pieces of advice: First, stop hoping that this means 3Com will compete more effectively against Cisco Systems (NASDAQ:CSCO). In case anyone missed the news, Cisco buried 3Com in the enterprise market a decade ago and there's no changing that. Second, start realizing 3Com's best opportunity for success is in small and midsize business, thanks to an open source networking strategy that's finally coming together.

The key to 3Com's success is Asterisk -- an open source telephony platform. Much like Linux's ability to undercut Microsoft Windows pricing, Asterisk can support voice-over-IP applications at a lower price than traditional VoIP solutions from Cisco, Nortel, Avaya and other big equipment providers.

3Com's decision to support Asterisk is a move I predicted back in February. Now, 3Com is finally moving into the Asterisk telephony market. In fact, 3Com plans to offer Digium's Asterisk appliance to small businesses, the two companies announced October 1.

The Asterisk strategy could be a winner for 3Com in small and midsize businesses, and some enterprise departments. Other key targets should include K-12 and university CIOs.

3Com's partnership with Digium should not be underestimated. Digium pioneered the Asterisk market, and recently acquired a key rival called SwitchVox. 3Com is now far better positioned to serve small businesses that want low-cost VoIP systems.

But competing with Cisco at the high end? Let's not get ahead of ourselves here, folks. 3Com has made some progress in the past year, but the company remains a shell of its 1990s self.

Asterisk and the buyout by Bain may go a long way to changing that -- at least in the small and midsize business markets.