HP Buys 3Com to Play Cisco's Server Game

hplogoUpdated: HP said today that it plans to buy router and switching gear maker 3Com for $2.7 billion — a deal that seeks to put HP on better competitive footing against Cisco and its server efforts. HP and the rest of the computing industry have struggled to come up with an answer to what Cisco calls unified computing systems, which combine servers and networking into one box, and in doing so have tended to lean on partnerships with networking providers such as Brocade and Juniper.

With its No. 2 line of Pro Curve networking gear, HP  was seen by the industry as being in the best position to compete, so this deal looks like an admission from HP that it has some holes in its networking portfolio that Cisco could exploit.  The boards of both companies have approved the deal. HP will pay $7.90 per share in cash for 3Com. My question is: Why didn’t it buy Brocade?

Update: Cisco has posted a comment in response to the deal, basically saying that HP is welcome to follow its industry leadership in unified computing.

Update2: Dan Primack over at peHUB has raised some legitimate questions about the price HP paid, and noted how 3Com’s stock has been steadily rising in the last couple of weeks. He pulled some Bloomberg data that shows how trading volume shot up today before the deal was announced, leading him and other blogs to suspect insider trading may be at work.

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