HP's Networking Gamble

HP's acquisition of 3Com comes barely few months after 3Com
celebrated its 30 years of founding by Bob Metcalfe who incidentally
was also the inventor of Ethernet. The deal, worth $2.7 dollar will
make HP a strong player in the enterprise networking space and allow it
to offer wide range of IT and networking products and solutions. More
directly, it would provide a solidity to HP's data center strategy,
which can now boast of an integrated offerings on the lines of what
Cisco has on offer.



3Com's reputation has been that of a 'price warrior' since the time of
its inception with the company taking on traditionally strong players
like Cisco and Juniper in the switching and routing space. Although
HP's networking division Procurve somewhat was complementing the
company's networking needs, but there was not much synergy and it
appeared to be positioned as a separate entity.



It appears that pure play players and the distinction of vendors into
IT hardware and services and networking clearly getting blurred with
both former and latter getting into each others' domains. In a direct
reference to Cisco, this sentiment was echoed by Dave Donatelli, vice
president of H-P's enterprise server and networking division, in a
statement which said"Companies are looking for ways to break free from
the business limitations imposed by a networking paradigm that has been
imposed by a single vendor,"



After this acquisition, Juniper remains one of the few remaining only
pure play networking vendor with a global presence after Cisco got into
the server and storage market through its Unified Computing System
launched in March 2009. Cisco called this "new data center
architecture, innovative services and an open ecosystem of best in
class partners to help customers develop next-generation data centers
that unleash the full power of virtualization. But this was clear cut
target at some of its partners like HP and IBM. Technically speaking,
this was Cisco's attempt at integrating computing, networking, storage
access, and virtualization.



The deal also appears to be HP's strategy of focusing on emerging
markets like China. The deal which also strengthens HP's Ethernet
switching offerings, thanks to H3C's portfolio, which has a significant
presence in the Chinese market through its sales and R&D
presence. However, as far as India is concerned, 3Com's insignificant
presence and Procurve increasing mindhsare in the region will be a
perfect combination for HP which will seek to increase its networking
solution market share in India.



One challenge HP will have to overcome is the overlap between between
product portfolio of Procurve and 3Com. Procurve's offerings
include  switches, WLAN and WAN, data center management,
network security products while 3Com also has switching, routing, WLAN,
security, network management. One segment not addressed by Procuve and
which 3Com offers include IP telephony products which could be
beneficial for HP considering that the market is growing. Other clear
cut value proposition 3Com brings to the table include H3C (a Huawei
and 3Com JV) and Tipping Point  (3Com's security acquisition)
which  The deal, which was announced after market close, is a
clear indication of H-P's desire to tackle its longtime partner
Cisco(CSCO Quote) in its own backyard. Cisco stepped on H-P's toes
earlier this year when it entered the server market, signaling all-out
war between the two companies. As a part of merger agreement, the
transaction is expected to close in the first half of calendar 2010.