Wireless will be key overlap area in HP-3Com merger
Published: 13 November, 2009
READ MORE: M&A | US | Hewlett-Packard | 3Com | Wi-Fi
Hewlett-Packard is to acquire veteran networking equipment firm 3Com, which has been the subject of numerous takeover rumors or attempts over the years, but wireless will be an area of serious overlap that could lead to product and job losses.
HP will pay $2.7bn for the smaller firm, with the chief attractions being 3Com's strengths in the booming Chinese market and in core Ethernet switching, a major area of expansion for enterprises and carriers. But in the other product areas such as wireless Lans, networks for small-medium businesses, and edge switching, there is significant duplication.
This may be a minor disadvantage for HP, which has been lured by products for the next generation data center, such as 3Com's S 12500 and S 5800 data center core and aggregation switches - a market where HP has had no offering. Also taking on 3Com's enterprise edge and core routers, HP said the purchase gives it an "edge-to-core story that we didn't have before". Its main objective will be to compete with Cisco's Unified Computing System and the broader product range could also see it making more aggressive moves towards fixed and mobile carriers, as they too major on Ethernet routers.
At the low end of the wireless and wired networking market, though, HP and 3Com compete fiercely with very similar products and largely on price, so a rationalization of the ProCurve line-up would be logical. In WLans, HP's products are likely to have the upper hand, since it strengthened its range last year with the acquisition of Colubris. By contrast, 3Com, which has always struggled to make an impact against Cisco and Motorola/Symbol in the enterprise WLan, has an OEM deal with Trapeze.
The all-cash deal has been authorized by the boards of both companies, and pending approvals will close in the first half of 2010. 3Com has 32% of China's enterprise switching market with a subsidiary that started life as a joint venture with Huawei in 2003 - 3Com bought out its partner in 2006. In turn, Huawei tried to acquire 3Com in a joint bid with Bain Capital in 2007, but this foundered on US security concerns.
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