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LMADotD – HP buys network gear in 3Com

(LMADotD – “Let’s make a deal” of the day)

HP coughed up pocket change – $2.7 billion — to buy 3Com.  Expect lots layoffs at 3Com in the future.

Analysts are trying to spin this as HP takes on Cisco since 3Com has Ethernet switches and some routers. The deal also gives HP a bigger footprint in the Chinese market; 3Com has a 30 percent share there — not bad for a market expected to continue to grow.

HP will get some voice/VoIP technology to add to the portfolio, but seriously, if HP wanted to boost its telephony portfolio, they should have bought Polycom.

Back in 2007, 3Com tried to sell itself to Bain Capital and Huawei for $2.2 billion, but the detail got shot down in March 2008 by the U.S. government due to security  interests.

Brocade is currently feeling bummed out because HP was in talks to buy it, so they’ll take a stock hit.

Analysts say the purchase of 3Com’s deal gives HP the number two position in terms of network gear, but there’s a long road to travel before Cisco starts to break a sweat. Cisco has 70 percent of market share in terms of revenue, while a combined HP and 3Com have a 10 percent share of revenue.  As for units shipped, Cisco shipped 54 percent and HP/3Com have a 40 percent share….

Being an IP bigot at heart, the router is at the core of the network and you can’t really say that 3Com is a household name for routers, especially at the high-end.  If HP is really serious about networking gear, it will buy/merge with Juniper Networks.

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2 comments to LMADotD – HP buys network gear in 3Com

  • Hi Doug, I have been enjoying reading your analysis of the HD IP phone market for some time, but surprised at this post.

    It reads like a “I love Cisco” post. Don’t get me wrong but Cisco have done some great things in the Networking Space, and I agree they do have a 72% share in terms of revenue (3COM 3% / HP 5%). However, if you do this same share in ALL Managed ports shipped it looks slightly different, with Cisco having 55%, 3COM 8% and HP 10% .. What this actually shows to customers is that if you want Cisco you pay a premium, but you get more valus for your money with HP or 3COM than you get with Cisco.

    While I can’t comment on 3COM, HP have had 30% growth (less the blip everyone had in 2008) for the last three to four years. Proving that customers are sick of Cisco prices, and they are very interested in Open Standards within the network. Open Industry Standards, is something that HP and 3COM have been pushing since the invention of ethernet.

    Have a read of what HP management had to say about every networking vendor. They looked at them all, and saw that 3COM have kit thats fills the gaps in our own portfolio. Does Juniper? Brocade? Or is there significant product overlap? HP is not going to kill off the networking equipment that has seen HP become the second largest Networking Vendor (according to Analysts) or managed to get them seen as on of only two leaders in Gartners Magic Quadrant for Campus LAN – see http://mediaproducts.gartner.com/reprints/3com/166799.html

    Finally as disclosure, I work for HP in the UK. I am still looking forward to seeing what you have to say about HD Comms at an event in the UK soon. Any ideas when you are coming over?

  • Doug Mohney

    I don’t know how you read it as an “I love Cisco” post; the facts are there that Cisco currently has dominate market share regardless of the yard/meter stick and HP has a lot of work ahead to make Cisco sweat…

    The worldwide recession has a lot of people looking at alternatives to Cisco and I don’t expect that to change much…the big problem is that everyone is saying “They’re not Cisco,” but nobody is doing it hard enough to pull away from the pack, regardless of what part of Cisco’s lunch people are chasing.

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