3Com’s Existence After Citadel

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3Com (COMS-NASDAQ) took a hit this weekend as Barron’s questioned how effective hedge fund operator Citadel would be in nudging the strugging 3Com after it took a large stake of 8.4% in the company.  The article questioned the balance sheet and strained cash position, but more importantly this noted the loss of a key distributor in China. 

Their other concern was actually an echo of what we were thinking in prior weeks when the H3C venture was entirely rolled up by 3Com: Huawei is already about one-third of the way through its non-compete term with 3Com.  When that ends, it is probably a safe assumption that Huawei will be trying to take back all of its business that it can.

There is a reason that this was listed as one of our "companies management can’t fix" and it only starts with what Barron’s covered.  3Com shares are actually still higher than the pre-Citadel investment.  Now we’ll have to see if management can benefit from some new billionaires showing them what to do.

Jon C. Ogg
May 21, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.