Making Connections

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CHICAGO: Proving once again that where there is competition, there's consolidation, 3Com Corp. announced that it was swallowing modem maker U.S. Robotics in a $6.6 billion takeover aimed at garnering a bigger chunk of the fast-growing computer networking business. The deal puts 3Com back on a par with rival Cisco Systems Inc., which last April acquired StrataCom Inc. for $4 billion, then the industry's biggest deal. Previous mergers left the business only two other major players: Bay Networks Inc. and Cabletron Systems Inc. "The combination of 3Com and U.S. Robotics dramatically alters the networking landscape," said Eric Benhamou, 3Com's chairman and chief executive. Benhamou will keep the top job at the new company, which retains 3Com's name. Above all, the new 3Com expects to expand its customer range to include big and small corporations, telephone carriers, Internet service providers and consumers. The emergence of the Internet as business' brightest frontier has everyone scrambling for a piece. But both the unpredictable growth of that medium and the ever-present threat of alternate connection technologies make the networking sector an uncertain one. Indeed, 3Com shares are down by almost 50 percent in the past month, due mostly to general disfavor with the field. Although 3Com is convinced there is strength in numbers, Wall Street disagreed: 3Com finished down 4 at 35, while U.S. Robotics ended up 1 3/4 at 59 1/4. By creating a company with $5 billion in annual revenue and more than 12,000 employees, executives said the new 3Com would be one of the two biggest competitors in every facet of the networking business. Whatever the size of the pie, it never hurts to have a bigger slice.