HP aims for networking cloud with 3Com buy

Hewlett-Packard said Wednesday it plans to acquire 3Com, maker of network switching and routing products.

The deal is valued at $2.7 billion, or $7.90 per share. HP says the purchase is intended to boost its networking business, particularly in China, where most of 3Com's business is focused.

"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," Dave Donatelli, executive vice president and general manager of HP's Enterprise Servers and Networking business said in a statement.

3Com President and COO Ron Sege said he hoped that combining with HP's scale and large sales organization would allow him to get his products to more of the market quicker.

"I want to be able to grow faster...now we're going to have it," he said.

In addition to focusing on different geographic regions--half of 3Com's revenues last year came from its China operations--the two companies have little overlap in terms of products, which should make the integration of the two businesses simpler, Marius Haas, HP ProCurve Networking senior vice president and general manager, said Wednesday during a Webcast.

HP CEO Mark Hurd discusses his ambition to have a full 'stack' of IT technology at a Gartner conference in October.

(Credit: Stephen Shankland/CNET)

The 3Com deal is the most recent in a string of enterprise-related acquisitions HP has made in the past year, including most recently file serving software maker Ibrix. HP wants to be a leader in providing customers with an integrated stack of computing technology ranging from servers and storage at the foundation all the way up to services, Chairman and CEO Mark Hurd said at a Gartner conference in October. But to be competitive these days, a company has to fully commit to each element of the stack.

"You can't be in any one of them as a hobby," he said. "Compared to any competitor, you have to bring a combination of low cost and total cost of ownership, supported by innovation."

The 3Com buy should position HP in position to compete better with Cisco, the largest presence in the networking and routing market. In response to 3Com's acquisition by HP, Cisco released this statement: "While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT. As the leader in the networking market, Cisco is very confident in our business strategy, commitment to product innovation and ability to provide strategic business value to our customers in a highly competitive marketplace."

The 3Com deal is expected to close in the first half of 2010. HP stock barely registered the news, inching up 0.08 percent to $50 in after-hours trading Wednesday. 3Com's stock rose 5.18 percent to $5.69.

CNET News' Stephen Shankland contributed to this report.

This post was last updated at 3:40 p.m. PT with comments from 3Com and HP.

[rmva]

The EU just hates it when this kind of thing happens.

[Fil0403]

I agree. Pretty much every move from a market leader like HP is watched with some skepticism in EU, especially an acquisition. It's surely important to make sure there is competition, but this can also sometimes hurt the consumer, as IMO it happened when the EU made Microsoft go as far as deciding to sell Microsoft Windows 7 in Europe without a web browser.

[Vegaman_Dan]

HP's past record of service doesn't bode well for the 3Com brand. :/

This may boost sales to Cisco/Linksys as a result.

[sramana]

This will cause Cisco serious pain:
http://www.sramanamitra.com/2009/11/11/hp-acquires-3com/

[krln99]

I think the 3com nameplate will go the way of the dodo bird. Conversely, I think if Huawei were allowed to do that deal a few years ago (to acquire 3Com), I think Huawei would have seriously considered renaming itself 3Com. Oh well, what could have been.

[littleM]

This marks the end of the LAN era. In 1979, three companies started it all -- Sytek, Ungermann-Bass, and 3Com. Sytek was absorbed by Hughes. UB was bought by Tandem, which was bought by Compaq, which was bought by HP. Before that, UB was sold to Newbridge Networks, which was bought by Alcatel.

In the 1980s there were many other LAN companies -- David Systems, Bridge, Cabletron, Excelan, Vitalink, Kalpana, Crescendo, Network Peripherals, Alantec, Wellfleet, Grand Junction, Synoptics, Proteon, and, of course, Cisco -- but they all came afterwords (and all but one are gone).

[RobertFHarwood]

Don't forget Digital Equipment's (DEC) contribution to the creation of the LAN and the Ethernet standard. And as we all remember was bought by HP. And we can see all those great DEC inovations still on the market like the Alpha chip, which more then a decade ago was running 1 GHz, 64 bit, multiprocessor, with seperate caches for data and instruction (which meant the cache didn't get flushed as often).

[Jamie_Foster]

As far as I'm concerned HP has become an IBM wannabe. They used to have great products well made which lasted for years. Now they just peddle cheap chinese hardware or crappy indian software slap the HP logo on it and charge high prices. The low point was of course the takeover of crappaq. Carly Fiorina and especially Mark Turd are very short term focussed managers. One was a snake oil saleswoman (who was responsible for all those dodgy finance agreements with dot com startups when with Lucent) and Mark Hurd is a financial engineer par excellence. Between them they killed the HP way and have debased the quality of HP hardware. Both are total Rsoles.

[bblande]

Anyone here puzzled by the fact that the word "cloud" is in the headline but not one mention of cloud computing is in the article??

[SteveChicago]

I believe that it refers to the classic LAN/WAN cloud image and not the new "cloud" ambiguous use.

[kaiman75]

I work with Cisco equipment every day and I'll take HP and 3Com any day over Cisco products. In addition to better built equipment you don't have to put up with poorly written IOS, buggy software, incompatible and buggy GUIs and expensive license agreements that are virtually impossible to maneuver through when you need to get things fixed or do maintenance quickly. Hopefully this will encourage Cisco to pull their heads out of their butts...

[Fil0403]

I do not have much complaints regarding Cisco (AFAIK the only Cisco product I've ever used was a VPN client in university and it worked pretty much flawlessly), but I agree HP builds good equipment and provides good software and service, something I think is especially obvious in printers and computers, of which being a market leader is probably not unrelated.

[Fil0403]

This certainly puts HP in a better position to compete with leader Cisco. If their computers and printers (and respective support) are any "pattern", they will certainly provide very good networking products and services and represent serious competition to Cisco.

[ITcomposer]

3COM, you thought me the basics of LAN in school, your nic cards were awesome, i will miss thee.

sigh*