Corporate tax rates don't mean very much to firms that are losing money...
Posted on 05/06/2003 10:56:17 AM PDT by NEWwoman
(KCBS) Three Com has announced it will move its headquarters out of Silicon Valley. Jim Taylor in the KCBS Santa Clara County Bureau says Three Com is responsible for the Palm Pilot, and the company also sold its name to Candlestick Park for several years.
Silicon Valley Analyst Tim Bajarin said the company has fallen on tough times.
”There’s no question that [Three Com] continues to have a lot of struggles,” he said.
At one point, Three Com employed 12,000 people. Now, it has trimmed to less than a third of that.
”If this move (east) is done to help them be more efficient, more power to them,” Bajarin said.
But he told KCBS people should not put too much emphasis on the symbolism of this move.
”Silicon Valley continues to be extremely important, and it continues to be the center of the technology universe,” he said. “I just don’t see that changing.”
Oh, really?
California is losing even more of its tax base. Wake up and smell the coffee, you legislators and pass some *business friendly* legislation! Or its time for regime change.
Does it matter? What if 3Com is incorporated in Delaware, or some other corporate-friendly locale? Your larger point is true, however, as it is likely that California has other onerous business restrictions.
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Enron had to pay.
3Com, a pioneering Silicon Valley technology firm that has stumbled in recent years, is moving its headquarters from Santa Clara to Massachusetts, where much of its business operations are now located, the company announced Monday.
Chief Executive Officer Bruce Claflin and six other executive positions are being relocated from California and Illinois to Marlborough, Mass., where most of 3Com's enterprise networking business is based.
The firm was once a marquee company and major employer in the valley. The Ethernet standard it popularized in the 1980s made it possible for businesses to easily network their computers. But 3Com was long ago eclipsed by rivals like Cisco, and in recent years, has sharply cut its worldwide and local workforce as losses mounted.
Now, 3Com is shedding businesses to focus mostly on enterprise networking after it disposes of its CommWorks business that sells to telecom companies over the next two months.
The move to Massachusetts will help centralize 3Com's top management and make the company more efficient, Claflin said in a statement.
Opportunity is there
``Two-thirds of 3Com's U.S. opportunity is on the East Coast, and approximately half of our sales are in Europe, meaning the majority of our customers and partners are more accessible from Marlborough than Santa Clara,'' he said. ``Most of the major financial institutions that represent our investor base are also on the East Coast.''
Claflin joined 3Com in 1998 as the No. 2 executive and was promoted to chief executive in 2000, succeeding Eric Benhamou, who remains chairman of the company today. Claflin has roots in Massachusetts. He formerly served as senior vice president at Digital Equipment Corp. of Maynard, Mass. He moved to 3Com shortly in 1998 after Digital was acquired by Compaq Computer of Houston. At the time, he said he took the 3Com job partly because it had a substantial presence in Boston, where he lived.
Santa Clara officials expressed surprise at 3Com's announcement and said the loss of the headquarters was unfortunate for the city, but not devastating.
``Cities appreciate when headquarters are located in their jurisdictions,'' said Deputy City Manager Carol McCarthy. ``It's certainly something that cities feel some pride in. But we realize that businesses have to make decisions based on their bottom lines.''
Geof Goodfellow, Santa Clara's director of planning and inspection, said: ``It's more of a prestige thing'' than a financial blow to the community, because 3Com already had significantly scaled back its Silicon Valley presence. ``It's certainly far different from what they were five years ago.''
Founded in 1979, 3Com popularized Ethernet, which quickly became the industry standard for easily connecting small networks of personal computers. It became one of the valley's fastest-rising stars and boasted a corporate complex in Santa Clara that at one point sprawled across about 1 million square feet. In 1995, 3Com bought the rights to have its name replace Candlestick atop the San Francisco 49ers football stadium.
Fortunes soured
But 3Com's fortunes have soured. With Cisco Systems now dominating the networking market, 3Com is trying to sell about two-thirds of its Santa Clara campus. Last year, it failed to renew its naming-rights deal for the stadium, now called San Francisco Stadium at Candlestick Point.
Two years ago, 3Com employed about 12,000 worldwide and 3,400 in Santa Clara.
The firm currently has about 3,900 employees worldwide and about 550 in Santa Clara.
3Com spokeswoman Pamela Sklar stressed that as far as she knows the company has no additional plans to drastically cut its local workforce. ``We're going to keep a presence here,'' she said, noting that the company still has legal, financial, communications and business development operations in Santa Clara.
Others going
Besides CEO Claflin, two other senior managers -- the chief financial officer and an operations executive -- have agreed to move to Massachusetts. Three others have declined to relocate and will be replaced. The seventh post -- an executive vice president of sales who has yet to be hired -- also will be based in Massachusetts.
Erik Suppiger, an analyst for Pacific Growth Equities and who holds no stock in 3Com, said he regards the move as a logical business decision and noted that the firm should remain a viable force in networking.
``Their technology is older technology,'' he said, ``and their position in the market is small and medium businesses, which is a less profitable segment.'' However, he added, 3Com is still big enough to warrant holding on to its Santa Clara offices.
But Chris Sessing, an analyst with Crowell, Weedon & Co., who said he owns fewer than 100 shares of 3Com, said he wouldn't be surprised if the firm eventually vacated much if not all of its Santa Clara space.
``Everything was based in Santa Clara at one point, and it sort of got strewn across the country over the years,'' he said, adding that ``it remains to be seen,'' what will happen to the remaining Silicon Valley operations.
Corporate tax rates don't mean very much to firms that are losing money...
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