HP to buy 3Com in networking, data center bid

IDG News Service - Hewlett-Packard has agreed to buy 3Com for about US$2.7 billion, pushing forward the giant IT vendor's strategy for combining computing, storage, services and networking under one roof.

The deal has been approved by both companies' boards of directors and is expected to close in the first half of next year. HP is offering $7.90 per share for 3Com, about $2 per share above the stock's price of $5.69 at the close of trading on Wednesday. U.S. and foreign regulatory approvals will be required, the companies said.

3Com will add to HP's Ethernet switching portfolio, which is already a growing competitor to Cisco Systems, and add routing products to its lineup.

"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, Enterprise Servers and Networking, at HP, in a prepared statement. "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 acquisition will also give HP access to a research and development team and strong sales channels in China, where 3Com operates the H3C subsidiary it originally formed as a joint venture with Huawei Technologies. The deal would also bring in 3Com's TippingPoint line of intrusion prevention products.

As data centers are centralized and virtualized, the largest IT vendors are pursuing data-center strategies that span all parts of what is increasingly a single infrastructure of networks, storage, computing and software. Cisco's introduction of servers earlier this year made it a more direct competitor to HP as well as IBM. HP's own ProCurve networking line has already gained ground on Cisco in enterprises over the past few years.

3Com has trailed the dominating Cisco in the networking arena since the late 1990s and has pursued several different strategies to find its place in the market. Its TippingPoint acquisition gave it a strong position in intrusion prevention, and the company has also focused on networking gear for small and medium-sized businesses.

HP plans to combine 3Com's enterprise network core and security products with its own offerings for the edge of the network to form an end-to-end portfolio, Donatelli said on a conference call about the deal.

"Every customer I speak to has asked us to do more networking," Donatelli said. There is little overlap between the two companies' products, and it will be easy to integrate them because both companies adhere to industry standards, he added. "We're ready to go to market day one with a portfolio," Donatelli said. HP executives declined to discuss what brand the products would carry until after the deal has closed.