HP to Buy 3Com for $2.7 Billion

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HP announced plans Wednesday to buy networking player 3Com in a $2.7 billion deal. It's intent: to become a force to be reckoned with in networking.

The agreement will see HP paying $7.90 per share of 3COM -- a premium above today's close of $5.69.

The move looks to buttress HP's own expansive role in the enterprise datacenter with 3Com's networking switching, routing and TippingPoint network security solutions. In a statement, HP said the merged company would be able to deliver an offering stretching from the edge to the core of the enterprise network while simplifying management.

As HP sees it, such an offering is needed in a field overshadowed by one player: Cisco.

"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," Dave Donatelli, executive vice president and general manager for HP's enterprise servers and networking unit, said in a statement.

"By acquiring 3Com, we are ... bringing disruptive change to the networking industry," he said.

Cisco, as it turns out, has been making its own effort to broaden its hold on the datacenter. The company in March launched its Unified Computing System line of products, aimed more squarely at the enterprise storage and server markets -- areas where HP has traditionally loomed large.

Meanwhile, 3Com has found a new suitor after having been left at the altar last year by Bain Capital, which withdrew its $2.2 billion offer after U.S. lawmakers raised national security concerns about the transaction.

Now, 3Com sees itself being able to help HP by providing expertise in simple-to-manage, low-cost and high-performance networking solutions.

"3Com's networking products are based on a modern architecture which has been designed to offer better performance, require less power and eliminate administrative complexity when compared against current network offerings," 3Com CEO Bob Mao said in a statement.

In particular, grabbing 3Com will give HP a boost in delivering Ethernet switching offerings. It will also give the company a leg up in China, where 3Com operates through its H3C unit, and which has become a key area of focus for the networking vendor, generating a hefty portion of its revenue.

Once the merger's complete, HP said it would also be putting its combined offerings to the test.

"We are confident that we can run our entire global business of 300,000-plus employees, including our next-generation data centers, entirely on the new HP networking solutions," HP CIO Randy Mott said in a statement. "Based on our experience and extensive testing of 3Com's products, we are planning to undertake a global rollout within HP as soon as possible after the completion of the acquisition."

The purchase is expected to close in the first half of 2010.

At press time, shares of HP were down 0.24 percent on the news, trading after hours at $49.88?. Meanwhile, shares of 3Com soared more than 35 percent to $7.70 in after hours trade.

Article courtesy of InternetNews.com