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HP Acquires 3Com For $2.7 Billion

Posted on Wednesday, Nov 11th 2009

There were several options for HP to combat Cisco in the networking arena, including Brocade and Polycom. It looks as though they have chosen to go after Cisco front and center by acquiring 3Com. The latter has done a marvelous turnaround in the past three years. The stock has moved steadily up, and now HP is paying a 40% premium to make 3Com central to its networking strategy ($7.9 a share).

3Com’s China cost-structure has got to be the biggest driver, making it attractive for HP to hit Cisco where it really hurts. HP’s global channel will give 3Com’s products an excellent reach into the heart of enterprise and SME networks, as companies look to reduce total cost of ownership across the board.

Cisco’s margins will take a hit as competition strengthens. HP’s move is the most definitive indicator of what is to come.

P.S. I also believe that HP will acquire Brocade and Polycom subsequently.

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[...] companies have approved the deal. HP will pay $7.90 per share in cash for 3Com. My question is: Why didn’t it buy a [...]

HP Buys 3Com to Play Cisco’s Server Game Wednesday, November 11, 2009 at 2:57 PM PT

Sramana,
Very interesting acquisition, no doubt. I am not buying the Data center pitch though. Do you think 3COM was strong in its DC offerings to prompt this acquisition?

PLCM and BRCD are certainly in play, IMHO.

Piyush Wednesday, November 11, 2009 at 3:08 PM PT

I think Cisco are in serious trouble with this. HP have an enormous distribution channel and a superior brand. HP’s superior ease of use and deployment and much lower TOC will be Cisco’s downfall.

Mike J Wednesday, November 11, 2009 at 3:33 PM PT

No, I don’t think the 3com acquisition is about DC. It’s about core switches and routers, and also, possibly TippingPoint, 3Com’s security subsidiary.

Sramana Mitra Wednesday, November 11, 2009 at 5:09 PM PT

Its about H-3C… :)

SK Wednesday, November 11, 2009 at 9:03 PM PT

Come on. 3-Com. Which enterprise companies do you think is running with them? Much less how in the world will this help HP in the Data Center?

You really have to wonder what were they thinking picking up 3-com. I mean really?

Joe Boyle Wednesday, November 11, 2009 at 9:30 PM PT

The acquisition is about going right at the heart of Cisco’s bread and butter – their catalyst portfolio and getting a cost structure that no other networking vendor can have – 3Com’s highly skilled 2500 strong engineering pool is based in China thus helping get HP get an investment model that other vendors can only dream off. Also, HP has a huge service channel which can shovel loads of HW in its depoloyments – Its a great fodder for them. I agree, this is going to hurt Cisco. Also, note that unlike popular perception 3Com core products are very much up there, very close or better than Cisco in capabilities.

Ram Wednesday, November 11, 2009 at 10:36 PM PT

Cisco’s next chess move will be to buy BMC to take a strike at HP’s BTO portfilio.

Mark Thursday, November 12, 2009 at 2:25 AM PT

[...] bid to expand into the networking industry, the leading computer manufacturer HP will be acquiring 3Com. The idea is perhaps to counter Cisco whose networking products dominate the industry. 3Com [...]

HP to acquire 3Com: Lets break Cisco’s hegemony | Startup Meme - Technology Startup and Latest Tech News Thursday, November 12, 2009 at 8:20 AM PT

I agree that this acquisition is not about the datacenter. It is about Cisco’s bread and butter – routers and switches. And it is about China. Both Chinese cost structure and Chinese market share, both of which are 3Com’s strengths.

Sramana Mitra Thursday, November 12, 2009 at 8:42 AM PT

I am not buying the Data center pitch though

bukmacherzy Friday, November 13, 2009 at 9:07 AM PT

I agree. Hence, I find strange that Brocade stock price is taking a hit. If anything, I think HP still needs BRCD to strengthen their data center portfolio.

Piyush Friday, November 13, 2009 at 12:58 PM PT
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