HP acquires 3COM for $2.7 Billion – Why ? And why didn’t they pick up Nortel for $900Million ?

by Jeff Wiener on November 13, 2009

hp_logo_2Interesting acquisition. Industry networking leader HP announced yesterday that they acquired 3COM for $2.7Billion. There’s clearly product overlap in the SMB space, but the real crown jewel for HP will be their quick foray into the data center space. 3COM has some significant products that service this high-end data aggregation switch market. These include the S12500 and S5800 data center core and aggregation switches.

According to HP’s press release:
This combination will transform the networking industry and underscore HP’s next-generation data center strategy built on the convergence of servers, storage, networking, management, facilities and services. The resulting business outcome will help customers simplify the network, deploy a unique and innovative edge-to-core network fabric for the enterprise and improve IT service delivery capabilities, all delivered with best-in-class price-performance.

3com-logo-rgb3COM also brings along their core routing and edge devices, another market where HP had a big hole in their product portfolio. So, on the surface it seems like an excellent purchase.

Layer 2 / 3 Switching, SMB Market
HP and 3COM competed in the SMB space, so there will clearly be some product overlap in this Layer 2 / 3 – 10 / 100 / 1000 market. Not sure which product will dominate in this space, perhaps a best of breed of both products.

Voice VoIP Market
Although 3COM has a voice product they haven’t had great success in gaining traction in this market. Their NBX product competes in the SMB space, but after many years in the market they have only managed to gain a 0.5% market share. There clearly isn’t much customer base to work with, but, the technology will provide HP with an amazing VoIP foothold, brains, phones, and an entry point to springboard into the VoIP market. After all, Cisco entered into the VoIP market with their acquisition of Selsius in 1998, a small no name brand that Cisco acquired for $145Million.

This purchase will provide HP with an excellent end to end to end solution. They clearly have sights on Cisco and this will give HP the depth of product portfolio they need to compete against Cisco.

According to the HP press release:
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 Randy Mott, executive vice president and chief information officer, HP. “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.”

This deal has obviously been brewing for some time, and it surely must have occurred to HP that Nortel’s potfolio would have provided an even better entry into the core switching, data edge device, and VoIP market. Not only that but, the purchase price as per the Avaya acquisition was 1/3rd of the current $2.7Billion purchase. So, why did HP pass on the Nortel deal ?

Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

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Jose November 20, 2009 at 8:14 pm

..because Nortel gear sucks.

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