3Com, Cascade and IBM in Net Venture
International Business Machines Corp. is joining with Santa Clara-based 3Com Corp. and Cascade Communications Corp. in an initiative to unclog Internet bottlenecks, taking on a key product from Cisco Systems Inc., analysts said.
Networking companies 3Com and Westford, Mass.-based Cascade along with IBM will unveil a networking approach known as IP switching today in New York.
Eric Benhamou, 3Com’s chairman and chief executive; Daniel Smith, Cascade’s president and chief executive; and Lutz Hahne, general manager of IBM’s networking hardware division, will announce the plan, which is designed to speed access to the Internet and accelerate corporate intranets.
The technology has the potential to transmit data up to five times as fast as the router technology that currently dominates the market, analysts said. San Jose-based Cisco, which had sales of $4.1 billion in its latest fiscal year, leads that market. Last year, Cisco acquired StrataCom Inc. for $4 billion in stock in the largest takeover in the network equipment business.
Internet service providers that are struggling to cope with too much demand are interested in new products to speed up traffic cost-effectively, analysts said.
“All the competitors [of Cisco] smell blood here,” said Joseph Noel, an analyst at Hambrecht & Quist.
Analysts say the network industry is a niche market that has been growing at a rate of 90% a year. Bay Networks and Cabletron Systems are also big players in the market.
Cascade developed software that let customers upgrade their current Cascade switches to IP switches cost-effectively, Noel said. These switches are used by customers, chiefly Baby Bell phone companies, to regulate the flow of traffic on the Internet and through private corporate networks.
On Friday, Cascade stock tumbled 36% on worries about slowing sales of its largest product line, frame-relay switches. Noel said new products, including the IP switch, will help keep Cascade on a fast-growth track.
On Monday, shares of Armonk, N.Y.-based IBM closed at $145.75, down $4.75 on the New York Stock Exchange; Cascade shares fell $2.875 to $38.125 on Nasdaq; and 3Com was down $4 to $64.75 on Nasdaq.
