Hewlett-Packard Chases China With 3Com Deal

The server and storage maker plans to combine its own ProCurve networking products with 3Com's offerings, boosting its reach in corporate data centers. With many firms rethinking their IT strategies as the economy emerges from the recession, H-P is laying the foundations for an IT spending rebound, particularly around Ethernet switches and routers.

Another aspect of the deal, somewhat overlooked in all the brouhaha surrounding China and Cisco, is 3Com's security technology. The networking specialist bought Tipping Point for around $430 million in 2005, which could now boost H-P's own security story.

"H-P now owns a top-notch security business," said Cannacord Adams' Mansky. "The security portfolio already is a material competitor versus Cisco and Juniper(JNPR)."

With cybersecurity increasingly high profile for governments and businesses, expect H-P to layer TippingPoint technology on top of its hardware, software and services offerings.

With almost 6,000 employees, however, 3Com must now be integrated into the H-P machine. Even before the recession hit, H-P CEO Mark Hurd had earned a reputation for tight cost control which could prove key in swallowing 3Com. With a market cap of $2.23 billion 3Com is also much smaller than H-P's troubled Compaq acquisition, which should make Hurd's job easier, and ease any shareholder concerns.

-- Reported by James Rogers in New York

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