Securities and Exchange Commission
`Washington, D. C. 20549
`- - - - - - - - -
`
`FORM 10- K
`
`annual report pursuant to section 13 or 15(d) of the securities [X] exchange act of 1934
`For the Fiscal Year Ended May 31, 1996 Commission File No. 0- 12867 or
`transition report pursuant to section 13 or 15(d) of the securities [ ] exchange act of 1934
`For the transition period from ____________ to ____________
`
` 3Com Corporation
` (Exact name of registrant as specified in its charter)
` California 94-2605794
` (State or other jurisdiction of (I.R.S. Employer
` incorporation or organization) Identification No.)
`
`5400 Bayfront Plaza
`Santa Clara, California 95052 (Address of principal executive offices) (Zip Code)
`Registrant's telephone number, including area code (408) 764- 5000
`Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the
`Act: Common Stock, no par value.
`Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
`Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was
`required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
`Yes XX No
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S- K is not contained herein,
`and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated
`by reference in Part III of this Form 10- K or any amendment to this Form 10- K. [ X ]
`The aggregate market value of the Registrant's Common Stock held by nonaffiliates, based upon the closing price of the
`Common Stock on July 31, 1996, as reported by the Nasdaq National Market, was approximately $6,152,000,000. Shares
`of Common Stock held by each executive officer and director and by each person who owns 5% or more of the
`outstanding Common Stock, based on Schedule 13G filings, have been excluded since such persons may be deemed
`affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
`As of July 31, 1996, 169,570,302 shares of the Registrant's Common Stock were outstanding.
`The Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on September 26, 1996 is
`incorporated by reference in Part III of this Form 10- K to the extent stated herein.
`
` 3Com Corporation
` Form 10-K
` For the Fiscal Year Ended May 31, 1996
` Table of Contents
`Part I
` Item 1. Business
` Item 2. Properties
` Item 3. Legal Proceedings
` Item 4. Submission of Matters to a Vote of Security Holders
` Executive Officers of the Registrant
`
`Part II
`
`Item 5. Market for Registrant's Common Stock and Related Stockholder
`Matters
`
`Item 6. Selected Financial Data
`
`INTEL Ex.1093.001
`
`

`

`Item 7. Management's Discussion and Analysis of Financial Condition
`and Results of Operations
`
`Item 8. Financial Statements and Supplementary Data
`
`Item 9. Changes in and Disagreements with Accountants on Accounting
`and Financial Disclosure
`
`Part III
`
`Item 10. Directors and Executive Officers of 3Com
`
`Item 11. Executive Compensation
`
`Item 12. Security Ownership of Certain Beneficial Owners
`and Management
`
`Item 13. Certain Relationships and Related Transactions
`
`Part IV
` Item 14. Exhibits, Financial Statement Schedule, and Reports on
` Form 8-K
` Exhibit Index
` Signatures
` Financial Statement Schedule
`
`3Com, AccessBuilder, EtherLink, LANplex, LinkBuilder, LinkSwitch, NETBuilder, NETBuilder II, ONcore, Parallel
`Tasking, Transcend, and TokenLink are registered trademarks of 3Com Corporation. ATMLink, BRASICA, CELLplex,
`DynamicAccess, FDDILink, OfficeConnect, ONline, SuperStack, and ZipChip are trademarks of 3Com Corporation.
`Primary Access is a registered trademark of 3Com Primary Access. Aperture is a trademark of 3Com Primary Access. All
`other trademarks belong to their respective organizations.
`
`PART I
`
`ITEM 1. Business
`
`3Com Corporation (referred to herein as 3Com, Registrant or the Company) was founded on June 4, 1979 and pioneered
`the networking industry. Over the years, 3Com has evolved from a supplier of discrete networking products to a broad-
`based supplier of local area network (LAN) and network access systems for the large enterprise, small business, home and
`network service provider markets. Today, 3Com is a multi- billion dollar company offering customers a broad range of
`ISO 9000 compliant global data networking solutions that include routers, hubs, remote access servers, switches and
`adapters for Ethernet, Fast Ethernet, Token Ring, fiber distributed data interface (FDDI), Asynchronous Transfer Mode
`(ATM) and other high speed networks. Additionally, the Company offers Integrated Services Digital Network (ISDN)
`adapters and internetworking products for small businesses and home users, and integrated digital remote access systems
`used by network service providers and telecommunications carriers. 3Com's products are distributed and serviced
`worldwide through 3Com and its partners: principally systems integrators, value- added resellers (VARs), national
`resellers and dealers, distributors and original equipment manufacturers (OEMs). Certain products, such as ISDN digital
`modems, PC Card adapters and the Network Starter Kit, are also sold through electronics catalogs and retailers.
`3Com's name is derived from its focus on computer communication compatibility. Since its inception, the Company has
`been a leader in defining, shaping and promoting the growth of networking infrastructures that transmit data to all parts of
`the world quickly and efficiently. The Company's commitment to its customers goes beyond point- product excellence to
`making data networks funda- mentally easier to design, install, maintain and evolve. The Company's objective is to make
`the network invisible to the individual end- user as well as flexible and unconstrained for the network manager.
`
`INTEL Ex.1093.002
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`

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`During fiscal 1992 and 1993, 3Com focused on changing the direction of the Company to be more global in the industry.
`The Company rebuilt its product portfolio with the introduction of new adapter, hub and internetworking platforms,
`expanded the training of its sales force to sell connectivity systems and solutions, and expanded its global presence with
`new sales offices, service centers, and "parts banks" worldwide. The acquisition of the data networking products business
`of U.K.- based BICC Group, plc in fiscal 1992 strengthened the Company's position in the structured wiring hub market
`and expanded the Company's position in Europe. In fiscal 1993, 3Com enhanced its Token Ring technology base with the
`acquisition of Star- Tek, Inc., a Massachusetts- based Token Ring hub manufacturer. Also in fiscal 1993, to further meet
`increased demand for its network adapter products and to service the growing European market, 3Com began full- scale
`operations at its 60,000 square foot manufacturing facility in Blanchardstown, Ireland.
`In fiscal 1994, 3Com was the first networking company to introduce a new architecture. This architecture focused on the
`true customer requirements for scaling network performance and extending network reach. Combined with
`Transcend(registered trademark) Network Management, which was introduced in September 1993, this architecture,
`called High Performance Scaleable Networking (HPSN) demonstrated the Company's ability to deliver complete
`connectivity systems for the enterprise and beyond, and provided customers with a framework for building and managing
`scaleable, high- performance networking infra- structures. During fiscal 1994, the Company enhanced its product
`offerings under HPSN with two strategic acquisitions. First, 3Com acquired Massachusetts- based Synernetics, Inc.
`(Synernetics), 3Com's long- term development partner and the revenue leader in the LAN switching market at that time.
`The switching products of Synernetics are marketed under the LANplex(registered trademark) name and include the
`LANplex 6000 backbone switch and the LANplex 2000 family of departmental switches. Second, 3Com acquired
`Centrum Communications, Inc. (Centrum) of San Jose, California, an innovator in remote access internetworking
`technology. Centrum remote access servers for Ethernet and Token Ring networks are marketed under the 3Com
`AccessBuilder(registered trademark) trademark.
`Fiscal 1994 results included a $134.5 million pre- tax charge to operations for the combined effect of purchased in-
`process technology related to the acquisitions, and a wireless technology licensing agreement. Also during fiscal 1994, the
`Company expanded its product offerings with new and enhanced adapter, internetworking and stackable hub products,
`extended its worldwide presence with sales offices in five additional countries, expanded its major accounts salesforce and
`added new production lines at its manufacturing facilities in both the U.S. and Ireland.
`In fiscal 1995, there was accelerated customer migration toward higher performance and geographically dispersed
`networks. The Company expanded its product line to address this trend with high performance adapters, enhanced remote
`access products, new LAN and ATM switches and higher density internetworking platforms. In fiscal 1995, 3Com
`acquired substantially all the assets of Israel- based NiceCom, Ltd., (NiceCom) an innovator in ATM technology, and also
`acquired a company developing advanced network adapter technology. Fiscal 1995 results included a $60.8 million pre-
`tax charge to operations for the effect of purchased in- process technology related to the acquisitions.
`Also, in fiscal 1995, the Company capitalized on a substantial opportunity to provide connectivity solutions beyond the
`enterprise market, to the small and home office markets and to the commercial remote access market by completing two
`additional acquisitions. These acquisitions were the first steps in penetrating the small and home office networking
`markets, which provide dial- up connectivity to users of on- line information services, value- added networks, and
`transaction networks.
`First, 3Com acquired its ISDN adapter development partner, New Jersey- based AccessWorks Communications Inc.,
`(AccessWorks) in a purchase transaction. AccessWorks develops, manufactures, and markets ISDN transmission
`products. Second, the Company acquired all of the outstanding stock of Sonix Communications, Ltd., (Sonix) a U.K.-
`based innovator in ISDN internetworking technology, in a pooling- of- interests transaction valued at approximately $70
`million on the date the acquisition was announced. Sonix manufactures and markets a portfolio of network access products
`specifically designed for data and voice. Sonix's low- cost ISDN bridge/routers provide connectivity among small,
`dispersed workgroups and simple, high- performance, low- cost connectivity between central sites and remote offices. A
`market leader in the U.K., Sonix products are marketed throughout Europe and in the U.S. as part of the AccessBuilder
`family of remote access products.
`In fiscal 1996, the Company extended its market presence to network service providers and carriers, and enhanced its
`enterprise- wide networking solutions through three strategic acquisitions. First, in the first quarter of fiscal 1996, the
`Company acquired Primary Access Corporation (Primary Access) based in San Diego, California, in a pooling- of-
`interests transaction valued at approximately $170 million on the date the acquisition was announced. Primary Access
`pioneered software- defined access to public telephone networks with its digital Aperture(trademark) platform. Sold to
`interexchange carriers, cellular and local carriers, as well as providers of on- line information services, value added
`networks (VANs) and transaction networks, the Aperture platform replaces fixed- function hardware devices such as
`channel banks, modems, ISDN devices and remote access servers in central data processing sites or points of presence
`(POPs). Customers of Primary Access include CompuServe, AT&T, MCI, Sprint, regional Bell operating companies,
`more than 15 cellular carriers and leading banks and oil companies.
`
`INTEL Ex.1093.003
`
`

`

`In the second quarter of fiscal 1996, the Company acquired Chipcom Corporation (Chipcom), a provider of integrated
`multifunction hub and switching platforms, in a pooling- of- interests transaction valued at approximately $775 million on
`the date the acquisition was announced. Chipcom's principal product lines, the ONline(trademark) hub and
`ONcore(registered trademark) multifunction switching platforms, complement 3Com's focused- function switching, hub
`and routing products and enhance 3Com's enterprise networking solutions. Additionally, IBM resold Chipcom products
`under its own brand names. The IBM relationship has continued and has been extended to include other 3Com products.
`The Company further capitalized on its relationship with IBM by forming, together with Bay Networks, the Network
`Interoperability Alliance. This alliance aligns the architectural strategies of the three companies so customers are assured
`of interoperability between products, and provides for the pursuit of common networking standards that allow customers
`to simplify, standardize and enhance the design of interoperable switched networks, and facilitates the migration to
`interoperable VLANs. During fiscal 1995, Chipcom acquired Artel Communications Corporation (Artel) and DSI
`ExpressNetworks, Inc. (DSI). Artel designed and developed high- performance communication systems for the inter-
`networking and video distribution markets. DSI developed and manufactured intelligent hubs and related internetworking
`products.
`In the fourth quarter of fiscal 1996, the Company acquired AXON Networks, Inc. (AXON), a technological leader in next
`generation remote network management and monitoring (RMON2) and an OEM partner of embedded network
`management capabilities for 3Com systems products. The acquisition was accounted for as a purchase at an aggregate
`purchase price of $65.3 million, which included a pre- tax charge of $52.4 million for purchased in- process technology
`that had not yet reached technological feasibility. AXON provides client/server products for enterprise traffic
`management, including network management applications and network probes which enable central management and
`troubleshooting of remote networks.
`In recognition of the changing needs of large enterprise customers and the growing importance of network management in
`evolving data network infrastructures, the Company expanded and enhanced its architectural framework to embrace three
`equally important dimensions: scaling network performance, extending network reach, and managing network growth.
`The framework was named Transcend Networking to reflect the integral role of the Company's network management
`software, Transcend Network Management, and provides for the migration to virtual local area networks (VLANs), which
`the Company believes is the next phase of data network evolution.
`Under Transcend Networking, the Company introduced a number of new and enhanced products, including new stackable
`Ethernet, Fast Ethernet and Ethernet- to- ATM switches for connecting workgroups to high- speed backbones, LAN
`emulation capabilities for its CELLplex(trademark) family of ATM switches, Fast Ethernet and Token Ring capabilities
`for its LANplex family of backbone and departmental switches, and enhanced security capabilities for its AccessBuilder
`family of remote access servers. The Company also rebranded its remote access products under the AccessBuilder name
`and introduced the AccessBuilder 7000 Access Concentrator, the industry's first high- density LAN/WAN switch designed
`to provide remote access into corporate intranets. For the small office, 3Com introduced the OfficeConnect(trademark)
`system of "clippable" network components, the industry's first network system designed specifically for the small office.
`For desktop and mobile connectivity, the Company began shipping the industry's first LAN+modem PC Card adapter with
`v.34 (28.8 Kbps) connectivity, and enhanced Token Ring adapters based on 3Com custom application- specific integrated
`circuits (ASICs). Additionally, 3Com's industry- leading family of EtherLink(registered trademark) adapters were
`enhanced with DynamicAccess(trademark) capabilities, which allow the adapter to perform sophisticated network
`management functions and provide superior multimedia support, transforming the network adapter from a passive
`connectivity device to an active network component.
`The Company believes that its principal competitive advantages lie in the depth and breadth of its product lines, its ability
`to recognize and respond to new trends in data networking, its focus on making all aspects of networking easier for
`network managers and users, and a strong yet flexible business infrastructure. 3Com has strong brand recognition in
`Ethernet adapters, which it believes is transferable to other product and technology areas and markets, such as stackable
`networking systems, LAN switching and remote office and personal office internetworking platforms. Additionally, the
`Company believes its low- cost manufacturing, worldwide presence, flexible distribution strategy, and comprehensive
`service and support capabilities allow the Company to take advantage of market trends that are extending the reach, scope
`and performance of today's data networks.
`
`INDUSTRY SEGMENT INFORMATION
`3Com operates in one industry segment as described above.
`PRODUCTS
`
`3Com Corporation is committed to making the complexities of networks invisible to end users and to making networks
`easier to design, install, maintain and evolve. As the cornerstone of this commitment, 3Com has developed Transcend
`Networking, a unique framework that enables network managers to provide users with more services at their expected
`
`INTEL Ex.1093.004
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`

`

`response levels, at lower cost, with less risk and with less effort.
`Transcend Networking takes a "three- vectored" approach to evolving networks. Each vector consists of a host of
`innovative architectures, networking technologies, platforms and specific products. The three vectors include:
`o Scaling the Performance of the Network: Switching and desktop connectivity solutions which provide migration to
`increased LAN bandwidth/capacity by meeting the distinct requirements of the core and boundary of the LAN;
`o Extending the Reach of the Network: Wide area network (WAN) routing and remote access solutions which provide
`remote workgroups and individual users with connectivity to resources on corporate backbones by meeting the specific
`requirements of central and remote sites and of mobile and home users;
`o Managing the Growth of the Network: Networking products with embedded, scaleable management features and
`innovative distributed network monitoring, analysis and management solutions.
`Transcend Networking's Principles
`3Com designs solutions by first developing platforms (e.g., types of routers, switches, and remote access devices) that
`meet the distinct requirements of each location in the network, then selecting/developing the networking technologies
`(e.g., high- speed technologies, management features) to solve location- dependent needs and finally, packaging the
`solution (e.g., stackable or chassis form factor).
`Transcend Networking's driving principles include:
`o Technology and platform neutrality - - no biases toward any network type (e.g., Ethernet, Fast Ethernet, FDDI, ATM) or
`kind of system (e.g., switch, router, stackable, chassis) in order to offer customers more effective, economical and tailored
`solutions;
`o Centralizing complexity and distributing simplicity - - installing the more complex systems and network functions
`required at the network core to take advantage of central processing, support facilities and economies of scale, while
`distributing the simplest, easiest to maintain and least expensive systems to the network boundary where users are
`connected to the network;
`o Standards- based, open multi- vendor architecture - - innovative solutions based on industry standards to enable 3Com's
`systems to interoperate with any other vendor's equipment;
`o Investment protection with incremental evolution - - solutions that allow customers to upgrade their networks to new
`functionality and higher performance technologies as their needs evolve;
`o Low total cost of ownership - - providing complete enterprise, multiplatform solutions, combined with point- product
`excellence, which are optimized for total price/performance and efficient, low cost operations management.
`Within Transcend Networking, 3Com offers a complete breadth of products and innovative technologies that scale
`network performance, extend network reach and manage network growth for the enterprise market, as well as solutions for
`small sites/small businesses, network service providers and individual mobile or home users. 3Com's solutions include
`network systems products and network adapters, which accounted for 57 percent and 39 percent of fiscal 1996 sales,
`respectively.
`Network Systems Products
`LAN and ATM switching platforms: 3Com switches provide cost- effective, high- speed links between multiple network
`segments, simplifying network design and reducing network latency in client/server networks. Switches can also provide
`direct links to either the desktop or server, providing dedicated capacity to high- bandwidth users. The development of
`custom ASICs for switching is central to the Company's switching strategy. Virtually all of 3Com's internally developed
`switches are based on custom- designed ASICs, which the Company believes will dramatically improve performance and
`reliability while reducing costs. Switching ASICs developed by 3Com include the Intelligent Switching Engine (ISE) chip
`for Ethernet- to- FDDI switching, the BRASICA(trade- mark) chip for Ethernet and Fast Ethernet switching, the
`ZipChip(trademark) for Ethernet- to- ATM switching and the Token Ring Switching Engine for Token Ring switching.
`3Com switches are available in either chassis or stackable formats and are optimized to meet the specific need of the
`network core and its boundaries.
`High function switches: High function switches are designed to meet the requirements of the network core (backbone) for
`high density connectivity, scaleable capacity, reliability and network control, and to meet the migration needs of the
`customer. In a collapsed backbone environment, high function switches might act as a high- performance, high capacity
`switch connecting multiple boundary switches or hubs, or both, depending on the network design and bandwidth needs of
`the different network segments. 3Com's chassis (modular) high function switches include:
`o The CELLplex family of ATM switches for aggressive migration to cell- switched network backbones. CELLplex
`switches include VLAN capabilities for the creation of logical user groups and broadcast domains, as well as integrated
`ATM forum LAN emulation for smooth Ethernet- to- ATM communica- tions.
`o The ONcore line of integrated, multifunction switches for highly integrated migration from shared LANs to packet-
`switched and cell- switched backbones. The ONcore platform supports a full range of LAN technologies, including shared
`and switched Ethernet, Token Ring, FDDI and ATM, as well as remote access, routing and communication server
`functions.
`
`INTEL Ex.1093.005
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`

`

`o The LANplex family of LAN switches for migrating backbone router environ- ments to packet- switched LANs. The
`LANplex family of LAN switches offers high performance Ethernet, Fast Ethernet, FDDI and Token Ring switching for
`data center and department applications.
`Boundary switches: Boundary switches are designed to meet the requirements of the LAN boundary to reduce network
`latency at the desktop by providing increased bandwidth, and to provide simple, plug- and- play connectivity. These
`switches can provide either a direct desktop or server connection, or provide for greater network bandwidth by switching
`between Ethernet or Fast Ethernet hubs and the network backbone. 3Com boundary switches are available in either chassis
`or stackable format and provide for Ethernet- to- Ethernet, Ethernet- to- Fast Ethernet, Ethernet- to- FDDI, and Ethernet-
`to- ATM connectivity. The Company began shipping the LinkSwitch(registered trademark) family of stackable boundary
`switches as part of the SuperStack(trademark) network system in late fiscal 1995 and early fiscal 1996.
`Hubs: Hubs act as concentrators of network traffic generated from the desktop and define specific network segments,
`relaying the traffic either within the workgroup or onto the network backbone. Unlike switches, each desktop connected
`through a hub shares the total available bandwidth of the hub with other users. Their relatively low cost per port,
`manageability and ease- of- use, make hubs a popular choice for workgroup connectivity. Multiple hubs are frequently
`connected to a switch, which acts as a "hub of a hub," to segment the network and improve overall performance.
`The Company designs, manufactures and markets a full range of Ethernet, Fast Ethernet, Token Ring and FDDI hubs in
`either stackable or chassis- based configurations. 3Com's stackable hubs, including the LinkBuilder(registered trademark)
`FMS for Ethernet, Fast Ethernet and Token Ring networks, provide users with a highly reliable, cost- effective solution
`for networking workgroups in both the central site and remote office. 3Com's SuperStack II stackable network solutions
`offer customers significant capabilities such as routing, remote access, and network management. 3Com's chassis hubs,
`LinkBuilder MSH and ONline, offer higher density and sophisticated network management capabilities, making them
`ideal for growing departments and mid- size workgroups.
`Enterprise internetworking platforms: Internetworking devices link multiproto- col LANs within the building/campus
`environment and provide WAN connectivity to link multiple remote locations and provide access to the Internet and other
`remote network resources. 3Com offers a variety of internetworking solutions that extend the reach of the network, each
`tailored to the specific needs of the application.
`Backbone and remote office routers. For central sites needing high- performance bridge/routing and a choice of Ethernet,
`Fast Ethernet, Token Ring, FDDI, ATM and WAN connectivity, 3Com offers the high- density, multiprotocol
`NETBuilder II(registered trademark) bridge/router. Available in a range of compatible chassis with the ability to add
`additional processing power over time, the NETBuilder II offers a high degree of scaleability to handle evolving LAN and
`WAN integration requirements. The NETBuilder II also provides the central site connection for NETBuilder(registered
`trademark) Remote Office routers running Boundary Routing(registered trademark) software.
`NETBuilder Remote Office routers, designed for the remote or branch office, support Ethernet and Token Ring LANs,
`analog and ISDN lines, and System Network Architecture (SNA) applications over 3Com's Boundary Routing system
`architec- ture. Available in either standalone configurations or as part of the Super- Stack network system, NETBuilder
`Remote Office routers simplify remote office connectivity and offer extensive upgradability and flexibility as remote
`office routing needs evolve.
`Remote network access servers. Remote access servers provide central site connectivity for mobile workers and
`telecommuters accessing Ethernet or Token Ring networks from remote locations over public telephone lines. Available in
`densities ranging from 4 to 16 ports, the AccessBuilder 2000 and AccessBuilder 4000 servers are suitable for small to
`mid- size corporate intranets. To complete the connection at the remote site, 3Com offers the 3ComImpact (trademark)
`ISDN digital modem.
`Remote access concentrators: For network service providers with large dial- up networks and for enterprises building
`large- scale corporate intranets, 3Com offers the AccessBuilder 8000 and AccessBuilder 5000 network access
`concentrators. The AccessBuilder 8000 server (formerly Aperture II) is a high- density, software- defined platform
`capable of delivering network access to large numbers of concurrent users over both digital (ISDN) and analog lines. It
`has been installed by the world's leading online service companies, such as AT&T, CompuServe, Sprint and Microsoft
`Network. The AccessBuilder 5000 server, introduced in March 1996, is an integrated LAN/WAN switch designed to
`provide network access into large- scale corporate intranets. Built around the ONcore chassis, the AccessBuilder 5000
`server supports Ethernet and Token Ring LANs as well as up to 256 remote user ports.
`Small Office systems: In February 1996, 3Com introduced the OfficeConnect network system, a full range of hubs,
`servers and remote connectivity devices for the small office. The industry's first complete networking system designed
`from the outset to meet the needs of small remote sites and small businesses, the OfficeConnect system offers a unique
`"clippable" design, silent operation and a very small footprint. Leveraging its technological strengths in the enterprise
`market, 3Com provides the hub and Internet- optimized WAN access devices of the OfficeConnect system and partners
`with third parties for additional components such as fax, print and CD- ROM servers.
`
`INTEL Ex.1093.006
`
`

`

`Network management: In September 1993, 3Com introduced Transcend Network Management, a family of network
`management applications that represents a significant advance in simplified and logical management of LANs and WANs.
`Using Transcend applications on the network management platform of their choice, network administrators are able to
`create logical groups of hubs, routers, servers and desktop devices, regardless of physical location, to obtain correlated
`management information and control. To simplify network administration, Transcend products also leverage
`administrative resources by consolidating repetitive tasks, such as downloading router software, into a single command.
`In March 1996, when 3Com acquired AXON, a leader in the remote monitoring of network traffic, the Company formed a
`separate network management division chartered with coordinating development of enterprise- wide network management
`applications, policies and systems.
`Network Adapters
`Network adapters, also known as network interface cards (NICs), are add- in printed circuit boards that allow network
`servers, personal computers, laptop computers and workstations to connect to the LAN. According to International Data
`Corporation (IDC), a leading market research firm, 3Com is the leading provider of Desktop Ethernet adapters with a 40
`percent market share. According to Dataquest, 3Com also leads the market in Ethernet LAN PC Card (formerly PCMCIA)
`adapters with a 29 percent market share.
`In fiscal 1993, 3Com began shipping its family of EtherLink(registered trademark) III adapters with Parallel
`Tasking(registered trademark) technology, based on a 3Com- designed custom ASIC. Parallel Tasking is an innovative
`architecture that speeds data transfers by allowing separate tasks to be performed in parallel, resulting in higher overall
`adapter efficiency and performance than would otherwise be possible. The Company has applied for and received patents
`on certain aspects of this technology. In fiscal 1994, 3Com introduced Ethernet PC Card adapters for laptop and other
`portable computers, further extending the EtherLink III family. 3Com's EtherLink III adapters include 16- bit ISA, 32- bit
`EISA, MicroChannel and Combo adapters as well as the PC Card adapter. All are designed around 3Com's custom ASIC,
`which results in products that the Company believes are inherently more reliable, easier to install and configure, and less
`expensive to manufacture.
`In fiscal 1995, 3Com introduced a new, higher performance, lower cost version of its popular 10 Mbps EtherLink III
`adapters and extended the technology to include the new Fast Ethernet (100 Mbps Ethernet) standard. The Fast EtherLink
`III family of network adapte