HP shakes up networking market with 3Com buy

$2.7bn move sends shockwaves through the channel

The transaction is set to close next year

The channel woke up to the shock news this morning that HP is buying 3Com, in a move it claims will transform the networking industry.

Hardware behemoth HP, which is already a challenger to Cisco in the networking space through its ProCurve brand, confirmed that it has reached an agreement to buy 3Com for about $2.7bn (£1.6bn).

HP said the acquisition would expand its Ethernet switching offering, add routing solutions and strengthen its position in China. HP will also gain a foothold in the network security space through 3Com’s TippingPoint brand.

“By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure strategy and bringing disruptive change to the networking industry,” said Dave Donatelli, executive vice president, Enterprise Servers and Networking at HP.

HP chief information officer Randy Mott said HP would now boast the networking portfolio to kit out any large enterprise.

“We are confident that we can run our entire global business of 300,000-plus employees, including our next-generation data centres, entirely on the new HP networking solutions,” he said.

Jeremy Davies, founder of research house Context, argued it was a smart move for both parties.

“With 3Com suffering a downturn in Europe over the previous months, the acquisition makes sense for both 3Com and HP,” he said. “On the one hand HP takes out a competitor, gains the expertise and customer base from 3Com to better address the threat from Cisco, and on the other, 3Com no longer has to battle it.”

Davies added that the move would make little financial difference to European distributors. 3Com made sales of just €28m (£25m) through distribution in Europe’s top economies in the first half of 2009, compared with HP’s €3.2bn sales, he said.

Bruce Hockin, head of business strategy, at TippingPoint distributor Avnet Technology Solutions, said: "All predictions have led us to expect further channel consolidation and having been a key instigator of acquisitions itself over the last few years, Avnet certainly understands what makes them successful. The important point being to ensure that, throughout the inevitable changes, the value that both channel and their customers have come to expect from TippingPoint remains intact"

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