HP will acquire routing and switching veteran 3Com for around $2.7 billion, partly due to 3Com's success in the emerging Chinese market.
The all-cash, $7.90 per share deal has been authorized by the boards of both companies, 3Com said, and pending approvals will close in the first half of 2010.
HP general manager Dave Donatelli said the acquisition forms part of the company's strategy to broaden its product portfolio to cover everything “from the edge of the network to the heart of the data center.”
Ann Livermore, an HP executive vice president, said the acquisition would give HP a chance to go head-to-head against Cisco in industrial-strength networking. HP’s ProCurve networking gear is no. 2 in the market, but mostly aimed at enterprises.
“What we’ve been missing is networking for the core of the data center,” Livermore told the New York Times. “That’s where Cisco is strong, and before, HP couldn’t attack that.”
She said computer networking was a $40 billion market with high profit margins and healthy growth. “HP is eager and now positioned to disrupt the networking industry,” Livermore said.
US-based 3Com has captured 32% of China’s enterprise switching market with a company that began as a joint venture with Huawei six years ago. It bought Huawei’s stake in November 2006. Huawei attempted to buy 3Com as a minority partner with Bain Capital in 2007, but the bid collapsed because of US security concerns over Huawei’s links to the Chinese government and military.
Donatelli told investors during a conference call that 3Com had lacked the scale to capture multiple markets.
HP also views the rapidly-growing Chinese IT market as a key battleground in the years ahead, he said, and will benefit from the acquisition of 3Com's large Chinese R&D team.
The fate of 3Com brand is in doubt – HP will decide whether or not to keep it after the acquisition closes, Donatelli added.