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COMPUTER INDUSTRY

Hewlett-Packard eyes Chinese market with 3Com deal

Text by: NEWS WIRES
3 min

Hewlett-Packard has announced that it is buying networking company 3Com for 2.7 billion dollars in a deal that is expected to boost its presence in the fast-growing Chinese market.

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AFP - US computer giant Hewlett-Packard announced on Wednesday that it has agreed to buy networking company 3Com for 2.7 billion dollars, a move it hopes will help them further expand in the growing Chinese market.

The world's largest computer maker said the 3Com purchase advances a strategy to offer businesses datacenter packages that combine servers, storage, networking, management and services.

"By acquiring 3Com, we are accelerating the execution of our converged infrastructure strategy and bringing disruptive change to the networking industry," said HP general manager of enterprise servers and networking Dave Donatelli.

The takeover offer has been approved by HP and 3Com boards of directors.

Under the terms of the deal, 3Com stockholders will get 7.9 dollars per share of common stock. The acquisition is expected to close in the first half of next year providing it passes muster with regulators and stockholders.

3Com has grown into a 1.3-billion-dollar global corporation specializing in enterprise computer networking since it was founded in the US state of Massachusetts in 1979.

3Com brands include H3C in China and the TippingPoint computer security business.

"Our extensive product line and innovative technology together with HP's breadth and scale will expand our global opportunity," said 3Com chief executive Bob Mao.

"Our products are enterprise proven and widely deployed in the world's largest banks, manufacturers, Internet service providers, public utilities and retailers."

HP expects the 3Com acquisition to expand its Ethernet and routing offerings and significantly strengthen the California-based company's position in the fast-growing China market.

3Com has nearly a third of the computer-switching market in China and its products are used by 70 percent of that government's networks as well as in 300 of the top 500 enterprise companies in the nation, HP reported.

"Both companies are coming to this deal with great momentum in the marketplace," Donatelli said. "It gives us great critical mass."

3Com also has a major research facility in China.

"We bought this to grow," he added. "There are no two ways about that."

A 3Com acquisition would make HP more of a threat to networking powerhouse Cisco, which has been moving into the computer titan's turf. It would also help HP expand beyond a computer market beaten down by the financial crisis.

HP's acquisition of 3Com has the potential to "completely transform" the computer networking industry, Donatelli said in a conference call with press and analysts.

HP will become the number two player in a global computer networking market valued at 40 billion dollars annually, according to Donatelli.

"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," said HP chief information officer Randy Mott.

"Based on our experience and extensive testing of 3Com's products, we are planning to undertake a global rollout within HP as soon as possible after the completion of the acquisition."

HP on Wednesday also released preliminary financial results from its fourth fiscal quarter, reporting earnings of 99 cents per share on revenues of 30.8 billion dollars.

Revenues for the quarter were down eight percent from the same period a year earlier while earnings bested the 84 cents per share seen in the fourth fiscal quarter last year.

"Solid execution drove exceptional performance for HP this quarter, fueled by significant growth in China," said HP chief executive Mark Hurd. "We are delivering on our strategy and are well positioned going into 2010."

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