3Com marks 25 years; officials praise move to Mass.

Networking equipment provider 3Com Corp. Tuesday celebrated its 25th year in operations and the one-year anniversary of relocating its headquarters to Massachusetts.

The event at 3Com's headquarters in Marlboro, a western suburb of Boston included short speeches before hundreds of 3Com workers by Massachusetts Gov. Mitt Romney and 3Com CEO Bruce Claflin, who both lauded the state's tax structure when compared to that of California, where 3Com had its headquarters before last year.

Romney said California's individual income tax rate can range as high as 9.3 percent, compared to 5.3 percent in Massachusetts, while the sales tax in California is 7.5 percent, compared with 5 percent in Massachusetts. He also noted that companies that are struggling can delay state tax payments in Massachusetts, something they can't do in California.

"We have extraordinary advantages compared to California," Romney said in a brief news conference after his address. "Both are strong states from a technology standpoint. ... Our advantage will be tax rates, and their advantage will be weather."

Claflin agreed, saying, "When I think of why we are pleased to be in Massachusetts, I think of a state that used to be known as 'Taxachusetts' but no longer is."

With 130 colleges and universities, the state has "enormous" education offerings, he said, along with access to quality health care, a reliable infrastructure and an improved transportation system offering fast access from Marlboro to Logan International Airport in Boston. Claflin also noted that the company posted a 5 percent growth rate in its most recent

quarter compared to the same period a year ago, which he called a "milestone in our turnaround efforts."

Romney praised 3Com for surviving the "perfect storm" of the high-tech bust and postterrorism economic doldrums.

Analysts at the event, however, noted that 3Com's turnaround was a long time coming. The company's annual revenue exceeded US$1.3 billion for a single quarter in 1998, but they were at just $699 million for the fiscal year that ended May 28, several analysts noted.

Zeus Kerravala, an independent analyst in Boston, said 3Com is known as an equipment provider for small and medium-size businesses, but not for sales of its networking equipment to large businesses. For example, the 3Com VCX IP Telephony Solution is a high-quality switch technologically speaking, but hasn't attracted many customers, Kerravala said.

"3Com needs to get more enterprise users, and the next 12 to 24 months will make the difference," he said.

Claflin agreed that 3Com needs to better market its capabilities to large business users, and he took a few stabs at networking giant Cisco Systems Inc. He called Cisco "feudal" in its treatment of clients by locking them into the company's technology, with Cisco acting as the "lord of the manor over serfs tilling the fields."

Kerravala and other analysts said 3Com could probably benefit from recognizing Cisco as the $20 billion giant it is, and finding market areas where it can compete against its rival effectively.

3Com was co-founded in 1979 by Bob Metcalfe, who invented Ethernet in 1972. In 1979, 3Com delivered the first Ethernet network card, and it holds 1,146 patents, with another 613 pending. That's more than any other company in the data communications area, Claflin said.

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