Cisco vs. HP: 3Com acquisition ups the ante

Cisco vs. HP: 3Com acquisition ups the ante

Summary: HP's acquisition of 3Com fills out a few key parts in HP's networking portfolio. HP is clearly going hard after Cisco.

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Cisco and HP have been duking it over their visions for the next generation data center architecture and the battle is just getting interesting. Cisco entered the server market and HP has countered by purchasing 3Com for $2.7 billion.

Simply put, both Cisco and HP have encroached on their rival's home turf. The 3Com purchase gives HP a foothold in security (3Com owns TippingPoint), switches and routers (statement, breaking news). HP also becomes the No. 2 networking vendor. Cisco CEO John Chambers foreshadowed the HP collision course back in August. He declared HP a clear foe.

Also: HP announces $2.7 billion acquisition of 3Com; raises outlook

This chart from a Goldman Sachs data center report sums up how HP-3Com purchase changes the landscape (my notes added):

As you can see, HP's purchase of 3Com, which went for $7.90 a share or $2.7 billion, fills in a few key networking gaps for the company. The data center game plan for most vendors appears to revolve around offering a complete stack---ranging from servers to software to storage to networking and security. These various parts will ultimately work as one in the data center.

Chambers has been pretty clear that the data center will revolve around the network. On Cisco's latest earnings conference call, Chambers touted acquisitions as well as strategic alliances. Also: Cisco's beats for Q1; bullish on investments and recovery

I also believe that more of our customers are beginning to understand that the market adjacencies will in our view at first loosely and then tightly be coupled together from a technology and business architectural perspective, enabled by the common theme of the network becoming the platform for all forms of communications in IT. If the market adjacencies play out the way we expect, it will be very similar to what we saw with advanced technologies being viewed as standalone and then over time become loosely and then tightly coupled.

At the Gartner CIO powwow last month, HP CEO Mark Hurd argued that the data center winner will be able to offer a complete portfolio of hardware, software and services. “You can’t do any part of the stack as a hobby,” said Hurd.

The HP jabs against Cisco were unmistakable on Wednesday. HP in its statement said:

"This combination will transform the networking industry and underscore HP’s next-generation data center strategy built on the convergence of servers, storage, networking, management, facilities and services."

Translation: HP isn't going to let Cisco dictate data center architecture.

"Companies are looking for ways to break free from the business limitations imposed by a networking paradigm."

Translation: HP wants to free you from Cisco (and lock you into HP of course).

"By combining HP ProCurve offerings with 3Com’s extensive set of solutions, we will enable customers to build a next-generation network infrastructure."

Translation: HP is hitting Cisco in its core business since the networking giant is targeting servers.

"We are confident that we can run our entire global business of 300,000-plus employees, including our next-generation data centers, entirely on the new HP networking solutions,” said Randy Mott, CIO of HP.

Translation: We'll eat our own networking dog food as a proof of concept.

Cisco said in a blog post:

While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT.  As the leader in the networking market, Cisco is very confident in our business strategy, commitment to product innovation and ability to provide strategic business value to our customers in a highly competitive marketplace.

Add it up and the data center landscape is shifting into alliance mode. IBM will be pals with Cisco, Brocade, Juniper and any other networking vendor. Cisco will team up with EMC and VMware. HP is filling out its portfolio via acquisition.

What remains to be seen is whether HP's channel, services and distribution heft can challenge Cisco's 70 percent market share. This Goldman Sachs chart tells the tale:

Notice how neither 3Com nor HP were the vendors being invited to the request for proposal dance. It should be noted that both Juniper and Brocade are strong IBM partners. Will HP with 3Com be invited to upend Cisco going forward?

Topics: Networking, Cisco, Data Centers, Hardware, Hewlett-Packard, Storage

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10 comments
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  • 3Com has storage switch product?!

    Does 3Com has storage switch product line? Never heard of this!!
    solomon.yang
    • good point

      I goofed with that red check.
      Larry Dignan
  • RE: Cisco vs. HP: 3Com acquisition ups the ante

    all out war! all out war!
    shina_tsu_hiko1
  • RE: Cisco vs. HP: 3Com acquisition ups the ante

    Great analysis.

    I think the point to note here is that no. of customers who said they wont consider anything but Cisco has gone down from 44% to 28% - That is a significant drop in one year..and the vendor with the full portfolio, complete solution (service, security, channel, support warranty) and TCO is going to win the race and with this acquisition HP has given itself a really good chance to be that vendor given the brand presence and the portfolio of service offerings and channel breadth...

    sreeram_k
  • Hp has lost focus

    Their printers are generally crap, both in physical quality and firmware.

    Anyone had the misfortune of owning several 2420 series? Or how about the current gem, the p3005? What a joke.

    Here is a clue: all your products represent the company. IT departments that get burned in one area are highly unlikely to give you a chance in some other area of your business.

    Whatever you do, do it well. HP has been an epic failure these past 5-7 years.
    croberts
    • Don't know what made you so bitter.

      Our P3005 has been running perfectly and serves > 50 people in our office.

      I agree that some of HP's low-end consumer printers are somewhat on the flimsy side, but you get what you pay for - you don't get big name and cheap without corners being cut.

      HP's gear has generally lasted well and continues to perform more than adequately. Case in point - I am sitting next to an HP LJ 3330mfp that must be about 5-6 years old now. Still works as well today as the day it was bought. Vista x64 drivers came a couple of months after Vista RTM which was a mild annoyance, but never had any issues with it since.
      de-void-21165590650301806002836337787023
      • Don't make them like they user to

        I agree with you as far as you get what you pay for. But, even the new business laserjets that they produce cannot compare to the LaserJet 3 and 4 series. These things were workhorses. I still see them every once and a while.
        hybrid125
  • Seem focused to me

    If all your looking at is printers then you are looking at HP through a straw. HP core business has always been the data center and I think the current products are top shelf. I say that as someone that runs an almost exclusive Dell shop. When I retire my Dell servers I will be happy to replace them with HP. Dell has lost its focus..
    JustAITGuy
  • RE: Cisco vs. HP: 3Com acquisition ups the ante

    Tolly Report Shows how HP BladeSystem c7000 outshines the Cisco UCS based on network bandwidth
    http://tolly.com/DocDetail.aspx?DocNumber=210109
    IMsoorad
  • RE: Cisco vs. HP: 3Com acquisition ups the ante

    varqqs,good post!
    dsfwrryd1301-24353654314296078269402150143345