Breaking News: HP Set to Acquire 3Com for $2.7 Billion

HP and 3Com Corporation (NASDAQ: COMS) (“3Com”) today announced that they have entered into a definitive agreement under which HP will purchase 3Com, a leading provider of networking switching, routing and security solutions, at a price of $7.90 per share in cash or an enterprise value of approximately $2.7 billion. The terms of the transaction have been approved by the HP and 3Com boards of directors.

UPDATE: Some details trickling in

This is clearly a message to Cisco that HP will not go down without a fight in the networking business. HP has built up over the past decade a nice networking equipment business. This deal certainly put HP with a nice portfolio of products and technologies to compete in the new network architecture in the enterprise and cloud.

Some details on the deal:

– 3com: all new, modern products across portfolio; H3C gear is no joke, for example

– 3com: low cost and scalable operating model: leverage China-based R&D…hot products at a price that’s near impossible to beat — hello Cisco

– With Procurve, have all the routing and switching for the datacenter in one shop. Possible clean sweep of the data center

– HP has retention agreements with all the top talent and will run the new business with a combination of Procurve and 3com

– HP looked around at all they players and choose 3Com and this is the deal they chose. Very deliberate on 3Com

– HP track record on integration has been stellar of late. As shown by the EDS transformation, over time, HP can make a good acquisition great…this deal might really sing and put a sting into Cisco

John Furrier’s headed over to the HP campus right now to go get some first person response and interviews, so keep your eyes peeled here for updates

HP actually has the muscle to take some share in the enterprise because they have years experience selling into the enterprise like Cisco. I know many of my former HP execs have joined Cisco over there.

Cisco’s key asset isn’t product leadership but sales operations – and Cisco has beaten many by employing a price subsidize strategy in offering discounts to preserve the business under a competitive threat. That monopolistic approach works with networking startups but it’s harder with "fully geared up HP". HP can compete head on with Cisco on price, product, and cross subsidizing pricing to gain share.