3Com pins hopes on China's low labor costs

[Omaha Steve]

Source: Info World

CEO Edgar Masri is betting that cheaper labor costs in China will give 3Com an advantage over rival Cisco

Networking equipment vendor 3Com is counting on low labor costs in China to help the company earn better margins on its products and compete against rivals like Cisco Systems, the company's chief executive officer said Wednesday.

"There is one large player who is enjoying 68 percent to 70 percent gross margin on its products, while others are enjoying 40 percent to 45 percent gross margins," Edgar Masri, 3Com's CEO and president, said in an apparent reference to Cisco.

However, the disparity in salaries between China and other countries creates an "arbitrage opportunity" for 3Com, he said.

Arbitrage is the practice of exploiting price differences between two markets. While Cisco and others rely on expensive engineering talent in the U.S. and elsewhere, Masri is betting that cheaper labor costs in China will give 3Com an advantage, allowing it to price its products 30 percent to 40 percent lower than its competition.

Read more: http://www.infoworld.com/article/07/07/12/3Com-China-low-labor-costs_1.html

[The_Casual_Observer]

1. Perhaps it's just me, but if they save the labor costs but then price

the products 30-40% lower it's a wash isn't it? If Cisco is making 70% margin by using "expensive talent" & this 3-com place is making 30% they have problems that China isn't going to fix.

[PSPS]

2. Maybe that explains why I usually use Cisco products

When confronted with any project that demands the highest reliability, I always rely on Cisco products. Sure, they cost a lot more, but I've found them to be virtually bulletproof in regard to support and reliability.

You get what you pay for.