Nov. 16 (Bloomberg) -- Hewlett-Packard Co.’s history has been marked by hefty -- and so far successful -- acquisitions.

Backed by the cash flow from its printer business, the company bought Compaq Computer Corp. in 2002 for $17.6 billion and now is the top maker of personal computers. Last year, it paid $13 billion for Electronic Data Systems, becoming a bigger rival to International Business Machines Corp. in the computer services industry.

Now Palo Alto, California-based Hewlett-Packard is trying to take on Cisco Systems Inc., the leading manufacturer of computer network equipment, with a takeover that’s not only small but problematic.

Hewlett-Packard plans to buy 3Com Corp. of Marlborough, Massachusetts, which also makes routers and switches that control network traffic, for $2.7 billion in cash. 3Com shareholders get a 39 percent premium.

While 3Com has done well very recently the company has been a long-term laggard. It earned $115 million in the year ended last May, but this was after eight straight years of losses that totaled $2.81 billion.

What might have been: 3Com started in 1979, five years before Cisco. Cisco’s annual sales are now $36 billion compared with 3Com’s $1.32 billion.

Sad Story

Mark Hurd, Hewlett-Packard’s chief executive officer, is betting on a fallen brand. 3Com’s sales have plummeted since the dot-com craze, when they peaked at $5 billion or more in each of the three fiscal years ending in 1999. Its most recent annual sales are less than those of fiscal 1995.

Not that we shouldn’t wish Hewlett-Packard and 3Com well. Competition is what keeps the economy percolating. Customers who buy network gear have to be happy with the prospect of stiffer competition for Cisco with Hewlett-Packard in the game.

Watching financially strong companies battle each other for market share is certainly more fun than worrying about whether more banks will fail or reading about how executives earning a mere $250,000 can’t possibly manage until they get their bonuses.

Hewlett-Packard may simply be countering Cisco’s recent invasion of a big H-P business: corporate data centers, which store and transmit information and run applications. Cisco estimates it is a $20 billion-a-year market. Hewlett-Packard is facing increased competition elsewhere. Dell Inc. duplicated its rival’s move in computer services by acquiring Perot Systems Corp. this month.

Even Keel

After years of lackluster performance or worse, 3Com has been giving Cisco Chief Executive John Chambers a bit more to worry about. In China, 3Com matches Cisco’s market share of about 35 percent for routers and switches, according to Adam Jura, an analyst with Ovum, a consulting company in Sydney.

Hewlett-Packard is doing well in China too. Hurd, Hewlett’s CEO, says his company’s profit in the just-completed fourth quarter was helped significantly by sales in that country.

Bankrolled by Hewlett-Packard, 3Com -- the company that might have been Cisco -- finally may become a more formidable rival to the industry’s giant. Hurd may have other related acquisitions in mind.

In any event, Hurd is risking just $2.7 billion of the $13.5 billion in cash Hewlett-Packard had at the end of July. If 3Com continues to be a dud, he won’t have lost much.

(David Pauly is a Bloomberg News columnist. The opinions expressed are his own.)

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To contact the writer of this column: David Pauly in Fort Myers, Florida dpauly@bloomberg.net

Last Updated: November 15, 2009 21:00 EST