Hewlett Packard said today that it will acquire networking company 3Com for $2.7 billion. or $7.90 per share, a move that attempts to even the playing field with networking company Cisco, which rocked the industry earlier this year with plans to broaden its data center offerings. (Statement, Techmeme) In a statement, Dave Donatelli, HP's executive vice president and general manager of Enterprise Servers and Networking, said:
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. 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.
The boards of directors of both companies have already approved the deal, leaving it subject to approval by shareholders and regulators. The companies said they expect the deal to close in the first half of 2010.
In a call with analysts, Donatelli presented reasons that 3Com and HP is a good fit for a changing industry and said that today's news would be remembered as the day that the networking industry is being "completely transformed." He said it was important to note that both companies are entering this deal with "great momentum." 3Com, for example, already had 30 percent share in networking in China.
HP was pretty straight-forward about its reasons for the acquisition. It made this deal to grow and change what's occuring in the market today. Donatelli said the deal is part of the company's bigger Converged Infrastructure strategy, a push that brings networking, PCs, servers, storage into the mix. When the deal is complete, the combined company would be ready "from Day One" to launch its new portfolio of offerings.
Separately, HP also released preliminary fourth quarter results, with earnings coming in at $1.14, beating Wall Street's estimates of $1.12. Revenue was $30.8 billion, down 8 percent from a year ago but up 12 percent sequentially. Wall Street had been expecting revenue of $29.8 billion, according to Thomson Reuters. In a statement, Chairman and CEO Mark Hurd said:
Solid execution drove exceptional performance for HP this quarter, fueled by significant growth in China, We are delivering on our strategy and are well positioned going into 2010.
The company also raised its earnings and revenue guidance for the fourth quarter and fiscal year. For thej first quarter of fiscal 2010, it expects earnings of $1.03 to $1.05 on sales of $29.6 billion to $29.9 billion. Full year revenue is now expected to come in between $118 billion and $119 billion, up from the previous estimate of $117 billion to $118 billion. Full year earnings per share is expected to be in the range of $4.25 to $4.35, up from its previous estimate of $4.20 to $4.30.