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3Com Sells CommWorks For $100M

Network equipment maker 3Com Tuesday said it has sold off parts of its CommWorks business for $100 million in cash to telecommunications vendor UTStarcom .

The sale is expected to close within 60 to 120 days. The boards of directors of Alameda, Calif.-based UTStarcom and Santa Clara, Calif.-based 3Com have approved the acquisition, subject to various closing conditions.

The sale includes selected CommWorks' assets, including equipment; contracts, agreements, licenses and leases related to CommWorks' business; patents and/or rights to all intellectual property relating to CommWorks' products; and select working capital items (excluding accounts receivable and accounts payable).

"Acquiring the CommWorks assets will allow UTStarcom to add to its base of tier-one customers and accelerate its geographic diversification outside of China," said UTStarcom president and CEO Hong Lu. "We are already the largest vendor to China Telecom and sell to major customers such as China Netcom, Yahoo! BB in Japan, and Cable & Wireless. CommWorks will give us access to blue-chip customers around the world via its long-term relationships with 17 of the world's top 20 service providers, including AT&T, Sprint, and Verizon."

UTStarcom makes and sells wireline and wireless telecommunications access systems, cell phones, optical transmission products, and related software for building and managing voice and data networks. Its PAS system consists of remote radio terminals linked to a central office switch. The company also has product development partnerships with Japan Radio, Panasonic Mobile Communications, Sanyo, and Sharp.

After the CommWorks acquisition, UTStarcom said its global sales footprint will include offices throughout the U.S., as well as in Canada, Mexico, South America, the United Kingdom, Ireland, Germany, China, Taiwan, Japan, Korea, Vietnam, India, and the Philippines.

Without CommWorks in its immediate grasp, 3Com said it plans to take a "laser-like focus" to expand into higher-end data and voice offerings and compete more for mid to large-size customers and the channels that serve them.

"This transaction is the right thing to do for CommWorks with the right partner," said 3Com president and CEO Bruce Claflin. "With this transaction, 3Com is now a dedicated enterprise networking company, with a sharp focus on meeting the needs of the enterprise customer."

To that end, 3Com said it intends to utilize licensed rights on patents and IP transferred to UTStarcom to broaden and scale its existing enterprise networking portfolio.

To support this expansion, 3Com has been adding field and marketing resources dedicated to larger, more complex customers. The company said it will still offer integrated system designs and architectures while investing in ASIC and software development for emerging technologies including IP telephony, security, storage, wireless, Gigabit and 10 Gigabit switching, Layer 3 switching, and Layer 4-7 switching.

A majority of the existing CommWorks employee base will receive comparable offers of employment from UTStarcom. The company said it would lease 3Com's Rolling Meadows facility in Illinois.