Smart Grid Showdown? HP Acquires 3Com to Challenge Cisco

Hewlett-Packard will buy network equipment manufacturer 3Com for $2.7 billion in a bid to grow its business in China and its network gear operations—and, ultimately, to challenge networking giant Cisco Systems.

As an element of Smart Grid technology for utilities, the combined offerings of HP and 3Com will be more than valuable because an intelligent electric grid and components, such as advanced metering, are expected to generate unimaginable amounts of data that will need to be efficiently managed. Also, its network security capabilities will bring HP another big bonus. 3Com's TippingPoint intrusion prevention products are in use at roughly 30% of Fortune 1000 companies.

HP is no stranger to acquisitions. HP CEO Mark Hurd has frequently acquired other businesses to build more attractive profits than its computer and printer product lines can deliver. His company bought Electronic Data Systems last year for $13.2 billion to enlarge its computer services operations.

The 3Com acquisition will give HP a large pool of resources, including engineers, a successful product line and a ready-made inside track to burgeoning business in China.

3Com is a top provider of networking switching, routing and security solutions. The 3Com acquisition will give HP's next-generation data center strategy a considerable boost. That strategy is built on the convergence of servers, storage, networking, management, facilities and services. According to a 3Com news release, the result 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's networking products are already deployed across a variety of businesses, from banks and manufacturers to Internet service providers and utilities. 3Com also is already a competitor with Cisco, so its acquisition by tech behemoth HP is sure to turn up the heat.

"Companies are looking for ways to break free from the business limitations imposed by a networking paradigm that has been dominated by a single vendor," said Dave Donatelli, HP's executive vice president and general manager, Enterprise Servers and Networking. "By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure  strategy and bringing disruptive change to the networking industry. 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."

   Quick Take: 3Com is already in competition with Cisco, which has been the top dog in network equipment manufacturing. Considering that Cisco has estimated the data center product market to be worth a whopping $20 billion, it's easy to see why the heavy hitters are consolidating to extensively broaden their tech offerings and take as big a bite as they can out of that lucrative market.

   Smart Grid company profile: HP

   HP press release

   Bloomberg news article

   Wall Street Journal blog

   Smart Grid company profile: Cisco