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Hewlett-Packard Says 3Com Takeover Adds Networking Scale to Tackle Cisco

Hewlett-Packard Co., a week after buying networking gear maker 3Com Corp., said its product line is set and it’s ready to take on all challengers, starting with market leader Cisco Systems Inc.

The new line, which brings Hewlett-Packard’s ProCurve products together with 3Com’s offerings, will be sold under the “HP Networking” banner, the company said today. It completed its $2.7 billion acquisition of 3Com on April 12.

While Hewlett-Packard has been in the networking business for more than two decades, 3Com adds products for corporate customers looking to equip their data centers. That gives Palo Alto, California-based Hewlett-Packard, which already sells server computers and storage devices to large businesses, a chance to compete in an enterprise network market that will total $30 billion this year, according to IDC.

“The really large-scale customers can now evaluate H-P as a viable competitor for networking,” said Cindy Borovick, a networking analyst for IDC in Framingham, Massachusetts. “This was something H-P had to do” as more customers look to a single technology provider to offer most of the equipment they need to run their data centers, she said.

Current Products

Hewlett-Packard already sells servers, storage devices, software and personal computers to corporate customers, which will help promote the expanded enterprise business, said Dave Donatelli, who runs the company’s server, storage and networking division.

Sales of servers, storage and some networking products totaled $4.39 billion last quarter and accounted for 14 percent of Hewlett-Packard’s revenue. The company said HP Networking sales have been counted in the corporate investments unit and will be through the rest of this fiscal year.

While 3Com, which gets half of its revenue from China, will help boost Hewlett-Packard’s networking sales, the company still has a way to go before it catches up to Cisco, IDC’s Borovick said. San Jose, California-based Cisco holds more than a 50 percent share of the enterprise networking market, while Hewlett-Packard, at No. 2, has less than 10 percent, she said.

The company now has more than 5,000 networking engineers assigned to help salespeople close deals, Donatelli said in an interview. Hewlett-Packard is ready to start selling so soon after closing the acquisition because there was little overlap with 3Com products, he said.

‘All Decided’

“The product line is set and all decided,” Donatelli said. “We’re already receiving orders.” He declined to say who those orders are from.

The networking products are expected to cost 35 percent to 40 percent less than rival offerings, Donatelli said.

“They’re faster, they required less energy, they’re denser and they’re newer architectures than what you can get out there from other larger players in the industry,” Donatelli said. “Customers want a choice and that choice allows them to have competition in the networking space that frankly has been lacking for the last decade.”

The company also said its new HP Networking products will run its Houston-based data center, with plans to convert all its data centers to the technology by the end of next year. That will serve as a “proof of concept” to customers, Donatelli said.

Hewlett-Packard fell 11 cents to $53.64 at 4 p.m. in New York Stock Exchange trading. The shares have gained 4.1 percent this year.

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

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