3Com improves distributors? lot

Vendor issues revised supply contracts but remains over-distributed

3Com has reissued supply contracts to its distributors, offering them price protection for 90 days, instead of 30, as well as increasing their discount by one per cent across the board.

The contracts come as 3Com is reorganising into three global business units in preparation to complete the merger with US Robotics (USR). As part of the restructure, 3Com will adopt a customer-focused instead of a product-focused approach so that each of the three units will target specific customers.

The enterprise unit will sell to large corporations, the carrier systems business unit will sell to network service providers, and the client access business unit ? incorporating USR products ? will sell to enterprise, carrier, small business and consumer markets.

Steve Rowley, UK MD of 3Com, stressed that since the $6.6 billion acquisition was announced in February, the two firms had been operating as competitors. He said the final position would not be known until June.

It is still not known which distributors will be retained when the merger is completed. Both companies have a total of 13 partners. Sources claimed that 3Com products will be supplied through volume distributors because they are commodity products and there will be little scope for niche distributors to add value.

Neil Ledger, MD of Data Connectivity, said the distributor?s business model hinged on adding value to product and it would only be willing to continue with 3Com if that opportunity continued.

Peter Rigby, networking general manager at broadline distributor CHS Electronics, said volume distributors were not under great threat. But margin had been severely cut out of the channel by over-distribution and that six would be a better number of distributors.

Meanwhile, Bob Finocchio, president of 3Com, has left the company for personal reasons.