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HP buys 3Com for $2.7bn cash

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Hewlett-Packard is taking a swing at Cisco Systems by acquiring networking equipment maker 3Com for $2.7bn cash.

HP said the deal will dramatically expand its Ethernet switching product offerings, add routing technology, and secure itself a major presence in China. In addition, HP will pick up a large research and development operation in China that's dedicated to HP's future networking pursuits.

3Com also provides network security capabilities through its TippingPoint portfolio.

The combination makes plain HP's intentions to sell just about everything for data centers, from servers, storage, management services and networking.

Both HP's and 3Com's board of directors have approved the acquisition, which is expected to close in the first half of 2010.

During an announcement tele-powwow Wednesday afternoon, Dave Donatelli, executive VP of HP's enterprise and networking claimed purchasing 3Com will make Hewlett-Packard number two in the networking market worldwide next to Cisco. It will also give HP a considerable footprint in China, where 3Com has over a 30 per cent share of networking gear.

"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," he said in a statement.

Donatelli added during the announcement call that because 3Com and HP data center products are based on open standards, the combined lineup is expected to be fully compatible and ready day-one after the deal closes.

HP emphasizes that the purchase will give it a near-complete portfolio of data center networking products. Donatelli said HP had previously only sold products at the "edge of the network" with its Edge switches. But now, HP is vowing it will run its entire IT infrastructure on its own kit.

“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 chief information officer Randy Mott said in a statement.

Donatelli said HP was impressed by 3Com's offerings because it has recently-released hardware, "feature-function benefit" over what's offered on the market today, and a "long runway" ahead of it in terms of HP directing future upgrades.

"I think the other really compelling thing here is what they've been able to do in China," he said. "First, they have an incredibly efficient development model in China that is very large-scale already. And they've had incredible success in gaining share in what we think is going to be one of the most critical IT markets going forward."

3Com has an R&D house in China with more than 2,500 engineers stabled. ®

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