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HP aims for networking cloud with 3Com buy

Hewlett-Packard says it plans to acquire the maker of network switching and routing products in a deal valued at $2.7 billion.

Hewlett-Packard said Wednesday it plans to acquire 3Com, maker of network switching and routing products.

The deal is valued at $2.7 billion, or $7.90 per share. HP says the purchase is intended to boost its networking business, particularly in China, where most of 3Com's business is focused.

"By combining HP ProCurve offerings with 3Com's extensive set of solutions, we will enable customers to build a next-generation network infrastructure that supports customer needs from the edge of the network to the heart of the data center," Dave Donatelli, executive vice president and general manager of HP's Enterprise Servers and Networking business said in a statement.

3Com President and COO Ron Sege said he hoped that combining with HP's scale and large sales organization would allow him to get his products to more of the market quicker.

"I want to be able to grow we're going to have it," he said.

In addition to focusing on different geographic regions--half of 3Com's revenues last year came from its China operations--the two companies have little overlap in terms of products, which should make the integration of the two businesses simpler, Marius Haas, HP ProCurve Networking senior vice president and general manager, said Wednesday during a Webcast.

HP CEO Mark Hurd discusses his ambition to have a full 'stack' of IT technology at a Gartner conference in October.
HP CEO Mark Hurd discusses his ambition to have a full 'stack' of IT technology at a Gartner conference in October. Stephen Shankland/CNET

The 3Com deal is the most recent in a string of enterprise-related acquisitions HP has made in the past year, includingmost recently file serving software maker Ibrix. HP wants to be a leader in providing customers with an integrated stack of computing technology ranging from servers and storage at the foundation all the way up to services, Chairman and CEO Mark Hurd said at a Gartner conference in October. But to be competitive these days, a company has to fully commit to each element of the stack.

"You can't be in any one of them as a hobby," he said. "Compared to any competitor, you have to bring a combination of low cost and total cost of ownership, supported by innovation."

The 3Com buy should position HP in position to compete better with Cisco, the largest presence in the networking and routing market. In response to 3Com's acquisition by HP, Cisco released this statement: "While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT. As the leader in the networking market, Cisco is very confident in our business strategy, commitment to product innovation and ability to provide strategic business value to our customers in a highly competitive marketplace."

The 3Com deal is expected to close in the first half of 2010. HP stock barely registered the news, inching up 0.08 percent to $50 in after-hours trading Wednesday. 3Com's stock rose 5.18 percent to $5.69.

CNET News' Stephen Shankland contributed to this report.

This post was last updated at 3:40 p.m. PT with comments from 3Com and HP.