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Hewlett-Packard to Acquire 3Com Corporation for $2.7 Billion

Hewlett-Packard (NYSE:HPQ), the world’s biggest personal-computer maker, plans to acquire network equipment maker 3Com Corporation (NASDAQ:COMS) in a $2.7 billion deal, stepping up competition with Cisco Systems Inc. (NASDAQ:CSCO) in computer networking.

The 3Com products will be folded into HP’s networking equipment business. HP says it will give 3Com stockholders $7.90 per share. Both companies’ boards have approved the deal, which HP expects will close in the first half of 2010.

The 3Com acquisition represents the latest attempt by HP, the world’s No. 1 maker of personal computers, to expand into more profitable areas than PCs. HP’s PC division made up nearly a third of the company’s total revenue in the last nine months, but only 17 percent of its operating income.

Just last week, Cisco Systems, Inc. (NASDAQ:CSCO) teamed up with EMC in a joint venture to combine their computing, storage, and networking products in a play for HP’s core business, enterprise computing equipment. Cisco just started making server computers this year.

3Com has nearly a third of the computer-switching market in China and its products are used by 70% of the Chinese government’s networks as well as in 300 of the top 500 enterprise companies in the nation, HP said. 3Com also has a major research facility in China.

A 3Com acquisition would make HP more of a threat to networking powerhouse Cisco, which has been moving into the computer titan’s turf. It would also help HP expand beyond a computer market beaten down by the financial crisis.


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