Hewlett-Packard is moving to expand its ProCurve networking business by buying 3Com for $2.7 billion, putting it in a better position to compete with Cisco Systems. The deal, which is expected to close in the first half of 2010, will give HP a greater networking presence in the enterprise, stronger network security capabilities and a larger presence in China. It also will help HP augment its converged data center solutions.
Hewlett-Packard is adding to its already strong networking capabilities by
buying 3Com for $2.7 billion.
HP officials announced the deal Nov. 11, saying the acquisition will give HP
an edge-to-data center networking story and feed into its push for converged
data center solutions through HP's Converged Infrastructure strategy.
"Companies are looking for ways to break free from the business
limitations imposed by a networking paradigm that has been dominated by a
single vendor," Dave Donatelli, executive vice president and general
manager for enterprise servers and networking for HP, said in a statement.
"By combining HP ProCurve offerings with 3Com's extensive set of
solutions, we will enable customers to build a next-generation network
infrastructure that supports customer needs from the edge of the network to the
heart of the data center."
The move will put HP in a strong position to compete with Cisco Systems in
the increasingly competitive networking space, and also will help HP build its
unified communications and collaboration capabilities, said Steve Schuchart, an
analyst with Current Analysis. Depending on the data being looked at, HP
ProCurve and 3Com were Nos. 2 and 3 in the networking space.
"Together, they are clearly No. 2 in the market," Schuchart said,
noting that the ranking includes everything from revenue to ports. "We're
seeing a fairly large consolidation in the market."
The deal will give HP capabilities in a number of areas in which the company
was lacking, he said. Both 3Com and HP have been strong in the small and
midsize business networking space, but 3Com will now give HP an enterprise data
switch portfolio that it needs to better compete with Cisco.
"They didn't have that big core switch," Schuchart said.
"They never had."
In addition, HP will acquire 3Com's TippingPoint networking security
business, which will bring high-end security capabilities to HP's networking
business.
Along with the networking products, HP will be getting 3Com's VOIP (voice
over IP) products, which Schuchart said have been popular in the SMB space.
"This gives HP a phone system," he said.
Adding a VOIP offering to HP's Halo telepresence and video conferencing
products will also expand HP's UCC (Unified Communication and Collaboration) capabilities.
"This puts HP in a much better position against Cisco," Schuchart
said. "Overall, this is going to be a big opportunity."
Through 3Com's H3C business, HP will also gain a larger presence in the
growing Chinese market.
In another challenge to Cisco, Randy Mott, executive vice president and CIO
at HP, said HP-a customer of Cisco-will now outfit its entire global business
with HP/3Com networking products.
"We are confident that we can run our entire global business of
300,000-plus employees, including our next-generation data centers, entirely on
the new HP networking solutions," Mott said in a statement. "Based on
our experience and extensive testing of 3Com's products, we are planning to
undertake a global rollout within HP as soon as possible after the completion
of the acquisition."
The boards of directors for both companies have approved the deal, which HP
officials said they hope to close in the first half of 2010.
The deal comes six months after 3Com
re-entered the worldwide networking market. 3Com had exited the global
enterprise space more than five years ago to focus on its SMB products, but
announced at the Interop show in Las Vegas in May that it was getting back into
the game on the strength of its H3C business in China.
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