HP buying 3Com in $2.7 billion blockbuster

HP Wednesday said it is acquiring 3Com for $2.7 billion, 30 years after Ethernet creator Robert Metcalfe co-founded the company. The acquisition will fill out HP's data center product portfolio with switches, routers and security products, plus expand its presence in China.

Under the cash transaction, HP will pay $7.90 per 3Com share. The terms of the transaction have been approved by the HP and 3Com boards of directors.

The companies hope their combined entity will give Cisco a run-for-the-money in data center networking and convergence.

"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, HP’s executive vice president and general manager, Enterprise Servers and Networking, in a statement. "By combining HP ProCurve offerings with 3Com’s extensive set of solutions, 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."

Do HP, 3Com value claims trump Cisco? 

3Com recently re-entered the North America large enterprise switching stage after years of focusing on China. The company boasts a wide array of switching platforms – from workgroup, to wiring closet edge to deep data center core – after acquiring the whole of a joint venture it had with Huawei called H3C.

HP, meanwhile, has been lacking a core data center switch for some time. Its data center-optimized switching lineup consists of a top-of-rack 24-port 10Gbps Ethernet switch called the ProCurve 6600, and the 6120 series blade switches.

In a recent Network World interview, HP’s Marius Haas (SVP and GM of the ProCurve Networking business) hinted strongly that HP would solve its lack of a core data center switch via the acquisition route:
"You can assume I'm looking at everything [buying and building]. I view the window of opportunity for us as now. The customer base is saying it wants us to step up now. So we're looking at everything - build, partner, buy. What's the best investment profile from a return standpoint, not just for our share holders but for our customers? So you should assume that's the pragmatic approach I'm taking."

Indeed, HP says it will run its global business and next-generation data centers entirely on the new networking platforms obtained from 3Com, as well as its own, soon after completion of the acquisition.

"It gives HP a core switch -- a brand-new core switch," says Steve Schuchart of Current Analysis of 3Com's H3C 12500, which the company is pitting against Cisco's Nexus 7000.

"It gives them a real platform to move forward with," Schuchart says, adding that the HP ProCurve 8212 and 5400 series switches didn't really cut the mustard for core applications. "This is newer, bigger and a much more purpose built switch."

A brief history of 3Com

3Com will also give HP some enterprise edge routers. The MSR line features a Linux-based server blade for running open source applications like IP PBX, security and WAN optimization, much like Cisco's wildly successful ISR series platforms.

There will be considerable overlap, however, at the low-end of both companies’ switching lines, Schuchart notes. HP will have to rationalize that and base its decisions on which product line is newer and more feature-laden. "Whoever has newer/faster/better/more will get the nod," he says.