3Com Will Route Customers to In-house Web Design Firm

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Event Summary

Network and telecommunications expert 3Com Corporation (NASDAQ: COMS) has purchased a 40 person company specializing in Internet design and strategic consulting. Details of the purchase of Interactive Web Concepts (IWC) of Mountain View, California were not disclosed.

Market Impact

3Com gets its foot into quite a few corporate doors. Comparing the booming E-commerce business with its own 6.5% sales growth, 3Com may have felt that it was time to step on the merry-go-round. IWC, which already boasts clients like Apple, Hewlett-Packard and Inktomi (and 3Com), will certainly benefit from both the financial backing and the sales contacts it gets from 3Com.

3Com says that the acquisition will enhance "the company's capabilities to provide total, turnkey e-business solutions for customers worldwide." We doubt that IWC will become simply an add-on service that 3Com can offer to its customers. Rather, we expect to see 3Com using IWC's design and consulting services both for their own revenue-generating potential and for IWC's ability to specify 3Com products and services as part of the total solution it offers its clients.

It isn't necessary to second-guess 3Com to wonder how much synergy this arrangement will really offer, however. Neither the stock price nor analyst ratings have been particularly positive about this acquisition, nor is it easy to see that there is a lot of technical logic pairing a network solutions company with a design shop. And, while more resources - both cash and the smarts on 3Com's management team - will be an undoubted benefit to IWC, there is always reason to be concerned that attempting to grow an essentially creative business will hurt more than help it. We do not expect any serious shakeup in either 3Com's market or IWC's.

User Recommendations

Ignore it. Make the best networking decision you can, which might well be 3Com. Make the best design firm decision that you can, which might well be IWC. If one of those is a member of this new "partnership" then try to get substantial price benefits for signing with the other. If such are not being offered, then you will lose nothing by ignoring the relationship between 3Com and IWC and going with the companies you chose as best meeting your needs.

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