HP buys 3com for $2.7 billion

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HP is to acquire networking company 3com in a bid to take on Cisco's market dominance.

HP is set to pay out $2.7 billion (£1.6 billion) for the company, which provides networking switches, routers and security solutions.

“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,” said Dave Donatelli, executive vice president and general manager for Enterprise Servers and Networking at HP, in a statement.

“By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure strategy and bringing disruptive change to the networking industry.”

Some analysts see this move as a direct effort to take on the recently announced Cisco/EMC/VMware joint venture.

Adam Jura, senior analyst for Ovum, said in a statement: “Unsurprisingly, Ovum believes this steps up the level of competition between HP and Cisco. While it may not be as confrontational as, say, SAP versus Oracle (Retek in particular), the implications could potentially be far reaching.”

“HP had already started to encroach upon Cisco’s market with its Procurve product line, however the acquisition of 3Com provides a serious boost to its data centre credentials,” he added.

Jura thinks the main thing to watch out for with this acquisition will be Cisco’s response, which could potentially involve a buy of its own.

“Cisco is currently holding around $4.7 billion in cash and equivalents on its balance sheet although this figure has dropped in recent quarters,” continued Jura.

“It does afford the company the opportunity to make an acquisition however Ovum does not expect anything immediately. The logical choice would be EMC and as such market rumours continue to abound. Regardless, Ovum expects the competition between HP and the network-dominant Cisco to continue to intensify particularly as network-centric technology solutions such as cloud computing continue to emerge.”

HP has confirmed the acquisition of 3com is set to be completed in the first half of 2010.

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