Hewlett-Packard has pounced on networking software and equipment maker 3Com Corp for $2.7 billion as it gears up to compete across the board with Cisco Systems.
HP, the world’s largest computer maker, has been hit by the economic downturn and is looking to offer a broader range of computer hardware and services to corporate customers. Cisco recently moved into the server business in competition with HP.
The 3Com deal is the latest in a series of takeovers in the tech sector as confidence returns to the market and large companies look to improve their portfolios.
3Com will effectively double HP’s presence in the networking equipment market in direct competition with Cisco. It will also give HP a biggest presence in China where 3Com’s H3C brand is the dominant networking gear player. HP has been looking to the rapidly growing Chinese market for increased revenue across its products.
“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,” said Dave Donatelli, executive vice president and general manager of HP’s enterprise servers and networking group.
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Last year, HP bought Electronic Data Systems Corp., making its high-margin technology services group its biggest revenue and profit generator.
The company said it will give 3Com stockholders $7.90 per share, a 53 per cent premium to Wednesday’s closing price of $5.18. Both HP’s and 3Com’s boards have approved the deal, which HP expects will close in the first half of 2010.
HP also issued a preliminary results report for the three months that ended in October, saying it earned 99 cents per share, compared with 84 cents in the year-ago period.
After adjusting for restructuring and other one-time items, HP said it earned $1.14 per share. Revenue fell 8 per cent from the same period a year ago, to $30.8 billion. By both measures, HP did better than Wall Street was expecting, according to a Thomson Reuters poll.
3Com is based in Marlborough, Massachusetts. In the most recent quarter, it had $290.5 million in revenue, with just over half coming from China.
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Jayson Noland, an analyst with Robert W Baird, said: “HP has been pushing pretty hard to improve the relevance of their own networking asset and this helps them extend their scale.
“It’s part of a broader theme where there’s a lot of talk of convergence in the data centre. Cisco and HP are going to compete more and more. We’re headed to a world where each of these large companies can give you everything you want.”