HP Acquisition Of 3Com Could Threaten Cisco Dominance

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HP’s $2.7 billion deal for 3Com will enable it to compete more closely with Cisco, as well as getting greater network security technology through 3Com subsidiary TippingPoint

At the Interop 2009 show in Las Vegas in May, officials with 3Com were showing off their networking product line as the company was making its way back into the global market, positioning itself as the low-cost alternative to Cisco Systems.

At the same time, those officials also were talking with their counterparts from Hewlett-Packard’s ProCurve networking business, picking up on a conversation started several months earlier when 3Com first approached HP about merging businesses, according to Marius Haas, senior vice president and general manager of HP ProCurve.

Now, six month later, HP is looking to buy 3Com for $2.7 billion (£1.6 billion), a move that at once would make it a formidable challenger to Cisco’s dominance in the networking space and give it more capabilities as it looks to compete with Cisco, Dell, IBM and others in the push for converged data centre solutions.

The deal, announced 11 November, also ramps up the speculation about what else might happen in the highly competitive networking space, which has its share of vendors, from Brocade Communications Systems to Juniper Networks to F5 Networks.

“I think we’re going to see more acquisitions, more consolidation,” Yankee Group analyst Zeus Kerravala said. “I think it needs to happen.”

HP and 3Com officials are touting the compatibility between their two companies.

“There isn’t much overlap at all, both on the product side and the geographic side,” HP’s Haas said during a Webcast with reporters and analysts.

Core data centre switch will change the game for HP

According to analysts, bringing 3Com into the fold will help HP ProCurve in a number of ways, most importantly by giving it the core data centre switches it hasn’t had in the past. During the Webcast, Haas and 3Com President and COO Ron Sege pointed to 3Com’s H3C S12500 enterprise switch, which the company launched at the Interop show.

It’s a key factor when talking about converged data centre solutions, which integrate compute, networking, storage and management software into a single offering. Cisco’s integrated data centre initiative also is benefiting from its growing alliance with VMware and EMC.

“HP has no unified offering to compete with Cisco’s UCS [Unified Computing System] converged architecture,” Forrester Research analyst Ellen Daley said in a blog post. “As a step to build it, [HP needs] a recognized enterprise-grade switch, which they get.”

HP also gets 3Com’s TippingPoint network security subsidiary, which Daley called “a jewel in the acquisition.” The company has about 7,000 customers, according to Sege.

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