HP scoops up 3Com for $2.7bn

Takeover of 3Com will give HP a substantial foothold in China

HP has announced that it has signed a deal to purchase network and security vendor 3Com for $7.90 per share, valuing the company at around $2.7bn (£1.6bn).

The purchase, which will intensify competition between HP and Cisco in the networking market, will almost double the size of HP’s ProCurve networking division and will give it an important foothold in China, where 3Com’s H3C brand has more than 30 per cent of the market.

“This creates a new global network leader in what is a $40bn market opportunity and that’s a market for us that is growing faster than many other markets we play in and offers a higher margin,” said Dave Donatelli, executive vice president and general manager of Enterprise Servers and Networking at HP

“It will make HP the number two enterprise networking vendor worldwide and gives us great critical mass in this very important space for us.”

He added that the deal was also a good fit from a technology perspective. HP ’s networking products are more focused on the edge of the network, while 3Com’ s range is more concerned with core switching and routing technology.

“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.

“3Com’s networking products are based on a modern architecture that has been designed to offer better performance, require less power and eliminate administrative complexity when compared against current network offerings. Our products are enterprise proven and widely deployed in the world’s largest banks, manufacturers, internet service providers, public utilities and retailers.”

The merger will be concluded by the first half of next year, HP said

However, it appears that the news of the merger was leaked. Trades in 3Com shares went through the roof in the hours before the announcement and up to 13 times as many trades were made in 3Com shares compared to normal.

"I think it's obvious people were speculating here.People were buying [options], hoping something would happen," William Lefkowitz, chief options strategist at vFinance Investments, told the Wall Street Journal.

"Looking at the volume, it looks as though something might have leaked."