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HP to buy 3Com in networking, data center bid

Stephen Lawson | Nov. 12, 2009
The deal will bring more Ethernet strength to HP's broad enterprise lineup

The purpose of the deal is focused on the traditional enterprise market, not service providers, HP said.

3Com, which once left the enterprise networking business altogether, has had trouble regaining ground in most of the world because it didn't have enough sales and marketing scale, Donatelli said. HP has examined 3Com's products and found them compelling enough that it plans to build all of its own networking infrastructure from the combination of 3Com's gear and its own, he said.

The deal will give HP the network parts it has needed in large enterprises, along with the power of a well-known name, analysts said.

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

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

3Com will also give HP some enterprise edge routers. The MSR line features a Linux-based server blade for running open-source applications such as IP PBX (Internet Protocol Private Branch Exchange), 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 said. 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 said.

The symbolism of the acquisition also counts for something, according to analyst Gordon Haff of Illuminata.

Even if 3Com is a shadow of what it once was, this is a storied company in the networking space. I think that has to rub off at some level on HP, from an internal engineering perspective and external perception, Haff said.

Yankee Group analyst Zeus Kerravala said 3Com's departure from the enterprise market about 10 years ago left a bad taste in the mouths of IT managers, but HP's brand and distribution can overcome that.

3Com is perhaps the most undervalued company in the networking space, Kerravala said. It has the broadest enterprise portfolio of any networking vendor except Cisco and will make HP an even more effective rival to the dominant networking company, he said.

In a statement Wednesday that did not refer directly to the proposed acquisition, Cisco said it is confident in its business strategy. "While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT," it said.


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