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HP and 3Com: A good fit, but not without overlap

Outside of core and aggregation Ethernet switches, product overlap considerable

By , Network World
November 12, 2009 04:33 PM ET

Network World - For the big game they're trying to bag – the $350 billion data center infrastructure and services market – HP and 3Com fit together remarkably well.

But the companies, soon to be united via HP's $2.7 billion buyout of 3Com announced earlier this week, face considerable overlap across much of the rest of their network gear, including low-end, SMB and edge switching, plus wireless networking.

The real attraction for HP in the 3Com acquisition are core Ethernet switching and immersion in China, both of which should strengthen HP's charge vs. Cisco and its partners, including EMC and VMware. HP says 3Com owns 32% of the networking market in China and boasts a monster of a core enterprise and data center switch in the H3C S 12500 (512 10G Ethernet ports) as well as the formidable S 5800 aggregation switch (24 to 192 10G Ethernet ports).

"[Networking in China] is actually a bigger market than the server market and bigger than the storage market," says Marius Haas, HP's senior vice president and general manager of HP's ProCurve Networking business, referring to two markets where HP has decades of experience and/or success.

Both 3Com data center switches are distinguished by price/performance, energy efficiency and widespread deployment in some of China's largest networks, including three of the world's top five banks, Haas says. 3Com claims the S 12500 doubles the performance and density of Cisco's Nexus 7000 while consuming half the power.

Up to now, HP could not address high-density aggregation and core switching applications in data centers. But with these 3Com products, HP can better attack next-generation data centers, where unified switching fabrics, virtualization and consolidated compute/storage and networking operations will drive spending for the next decade.

3Com also brings enterprise edge and core routing to HP.

"It gives us an edge-to-core [story] that we didn't have before," Haas says. It also gives them 8% of the $19 billion global market for Ethernet switching, a solid No. 2 but still well below Cisco's 71%, according to Dell'Oro Group.

Once the 3Com deal closes next year, HP will own scores of next generation data centers in China, where HP operations are already strong – the $120 billion company just posted a fourth quarter hike in revenue and profit thanks largely to business in China. HP will then set its sights globally to fend off Cisco and its Unified Computing System (UCS), which threatens to encroach on HP's blade server turf. It is this, plus 2,400 networking engineers in China that drove the marriage with the $1.3 billion 3Com.

"HP will be building a credible alternative to UCS, which is where a lot of the action is in data centers right now," says Rob Whiteley of Forrester Research. "The gloves are off and these two will make great competitors in the long run."

"We've got a lot of work to do so we're going to be focused on execution, but we really like our position here," Haas says. "Looking at the reaction from our competitors, we clearly caught them off guard. We're excited."

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