4 ms·

Hewlett-Packard to Acquire 3Com for $2.7 Billion

36 points by asnyder 17y ago

tptacek 17y ago
hdmoore: HP plans to buy 3Com ($2.7b), which owns TippingPoint, which runs ZDI [Zero Day Initiative, a market for zero-day vulnerabilities], which has a 1128-day [vulnerability] in HP products. "Maybe it was cheaper to buy them than fix all the bugs". (rim shot!)
BobbyH 17y ago
It seems like Cisco basically forced HP to compete with its high-margin network gear business, since Cisco moved into HP's server territory earlier this year (http://www.nytimes.com/2009/01/20/technology/companies/20cisco.html http://www.nytimes.com/2009/01/20/technology/companies/20cis...). It looks like attacking a competitor's cash cow often results in the competitor attacking your cash cow?
- SwellJoe 17y ago
  I'll be curious to see how it shakes out for each of them. It seems to me, from my admittedly ignorant view, like opening the Russian front was to Germany for both HP and Cisco. I suspect it's going to hurt both of them in the end, maybe to a significant degree. HP isn't really the clear leader in their space, though, but Cisco has so little history and mindshare in the server space that it seems like a pretty evenly bad idea on both sides. I don't know who will eat into Cisco market share when they make mistakes or spread themselves too thin, but I'm sure that Dell is ready to step in whenever HP makes mistakes or loses focus (as has been happening for years). Anyway, I believe saying Cisco forced HP to do this isn't quite accurate. The other option for HP might have been to double down on their own strengths, and just kick ass while Cisco tries to figure out how to crack a market where they have no brand awareness (a Cisco is a router...everybody knows that...would you buy a roll of Kleenex paper towels?). Cisco could very easily spend themselves out of the running, since they'll have to spend a lot more on sales and brand awareness for their server line than HP will for the same impact. Even if Cisco is a better run company, which I do believe is true, they're signing on for an uphill battle.
  - martincmartin 17y ago
    Yes, but it'll be good for everyone else, which more important. One of the most positive things about free markets is that competition lowers prices.
  - CamperBob 17y ago
    HP can now sue practically everybody else in the market sector for infringing on what must be the mother lode of networking patents.
    - SwellJoe 17y ago
      You don't think it would be a MAD situation to sue Cisco over networking patents?
  - jsz0 17y ago
    It's so much easier for Cisco to compete with HP than it is for HP to compete with Cisco. HP is competitive in access-layer switching and that's about it. No presence in big iron carrier class core gear, wireless, VOIP, security/IDS, CPE devices such as cable modems & IP set top boxes, infrastructure, SOHO consumer gear, etc. Meanwhile Cisco just has to slap together an X86 server, write some management software, and they've at least got a complete product line to compete with HP. I imagine HP is grabbing 3COM to make a push towards SOHO/consumer markets because 3COM isn't relevant in any of those above listed markets either for the most part. Cisco is more worried about Juniper, Brocade, Arris, etc. They are aggressively competing with Cisco in a lot of important markets. Cisco can offer a 40-50% discount and still be unable to compete with some of these companies on pricing. Unless you really need some screwball exotic feature set that Cisco offers you can find feature/performance parity easily. Interoperability between vendors is much better these days so there's less vendor lock-in and more acceptable of mixed networks. You might use Cisco in the core but go elsewhere for almost everything else.
- azim 17y ago
  One thing to note: HP has been in the networking business for almost a decade. Most of 3com's products aren't necessarily new to HP but will instead augment the existing portfolio. http://www.procurve.com/ http://www.procurve.com/
ciupicri 17y ago
I wonder what will happen with the 3Com brand, because IMHO 3Com > HP when it comes to networking. I suppose that it will disappear, but after how long? For example the Thinkpad brand still exists even if it was bought by Lenovo some years ago, while the Compaq brand wasn't used too much.
- wmf 17y ago
  I wonder if the 3Com brand is worth anything these days. I haven't heard anything interesting from 3Com in years; the switching market is dominated by Cisco/Juniper/ProCurve/Brocade/Extreme and even smaller newcomers like Force10 seem to get more attention than 3Com.
  - zackattack 17y ago
    Yeah, it's not like any 49ers fans are worried.
- jsz0 17y ago
  For branding 3COM would be better suited for the consumer market.
SwellJoe 17y ago
I held 3Com through a couple of years of steady decline back in the late '90s waiting for it to make a dent in Cisco. It never did, and I lost more on it that I've ever lost on any other stock. I don't have much confidence that HP management can alter that situation in any significant way. But then, I don't have much confidence in HP management since the Compaq merger, or even a few years before.
steveplace 17y ago
That news was soooo leaked before hand. Here's the stats on the option board today: - 8085 calls traded, 6 puts traded - 95% of those calls were bought on the ask - Open interest for the entire board was 13k, so very unusual. - Around noon, we had buys go at the offer (to open) for 3k Nov 5 calls and ~3k Dec 5 calls. Nice chunk of change for an overnight trade.
- joseakle 17y ago
  I'm sorry but i don't understand what it all means, would you care to explain?
  - callmeed 17y ago
    From http://en.wikipedia.org/wiki/Call_option http://en.wikipedia.org/wiki/Call_option: "The buyer of a call option wants the price of the underlying instrument to rise in the future" I'm no expert but I think it means a lot of people knew this was going to happen and bought call options knowing the share price would rise. 3com closed at $5.69 and HP bought it for $7.90.
  - BobbyH 17y ago
    Point by point explanation: * 3Com stock is up 35% (at $5.69) in after-hour trading because HP is offering a premium to the current stock price to acquire it. A call option to buy the stock for the fixed price of $5 (until it expired next Friday) sold for 80 cents when the market closed. * 3Com is up 2 bucks (35%) in the after market. The value of that call option will increase by around that mount. So the price of the option went up from 0.80 to ~2.80. That is an increase of 250%, which is way higher than 35%. This leverage is one reason people trade options. * The option buyer used a market order ("bought on the ask") to buy a ton of options, which is executed immediately at current market price. More cautious buyers tend to use a limit order in markets that don't trade a lot (like this one). A limit order will buy at no more, or sell at no less, than a specific price. This will move the market price less. * Given that the acquisition was announced later today, this large order of options is suspicious. This trade will almost certainly be investigated by the SEC.
  - 17y ago
sireat 17y ago
The price seems rather "cheap", I didn't realize 3COM had fallen down so low.

36 points by asnyder 17y ago

hdmoore: HP plans to buy 3Com ($2.7b), which owns TippingPoint, which runs ZDI [Zero Day Initiative, a market for zero-day vulnerabilities], which has a 1128-day [vulnerability] in HP products. "Maybe it was cheaper to buy them than fix all the bugs". (rim shot!)

BobbyH 17y ago

It seems like Cisco basically forced HP to compete with its high-margin network gear business, since Cisco moved into HP's server territory earlier this year (http://www.nytimes.com/2009/01/20/technology/companies/20cisco.html http://www.nytimes.com/2009/01/20/technology/companies/20cis...). It looks like attacking a competitor's cash cow often results in the competitor attacking your cash cow?

SwellJoe 17y ago
I'll be curious to see how it shakes out for each of them. It seems to me, from my admittedly ignorant view, like opening the Russian front was to Germany for both HP and Cisco. I suspect it's going to hurt both of them in the end, maybe to a significant degree. HP isn't really the clear leader in their space, though, but Cisco has so little history and mindshare in the server space that it seems like a pretty evenly bad idea on both sides. I don't know who will eat into Cisco market share when they make mistakes or spread themselves too thin, but I'm sure that Dell is ready to step in whenever HP makes mistakes or loses focus (as has been happening for years). Anyway, I believe saying Cisco forced HP to do this isn't quite accurate. The other option for HP might have been to double down on their own strengths, and just kick ass while Cisco tries to figure out how to crack a market where they have no brand awareness (a Cisco is a router...everybody knows that...would you buy a roll of Kleenex paper towels?). Cisco could very easily spend themselves out of the running, since they'll have to spend a lot more on sales and brand awareness for their server line than HP will for the same impact. Even if Cisco is a better run company, which I do believe is true, they're signing on for an uphill battle.
- martincmartin 17y ago
  Yes, but it'll be good for everyone else, which more important. One of the most positive things about free markets is that competition lowers prices.
- CamperBob 17y ago
  HP can now sue practically everybody else in the market sector for infringing on what must be the mother lode of networking patents.
  - SwellJoe 17y ago
    You don't think it would be a MAD situation to sue Cisco over networking patents?
- jsz0 17y ago
  It's so much easier for Cisco to compete with HP than it is for HP to compete with Cisco. HP is competitive in access-layer switching and that's about it. No presence in big iron carrier class core gear, wireless, VOIP, security/IDS, CPE devices such as cable modems & IP set top boxes, infrastructure, SOHO consumer gear, etc. Meanwhile Cisco just has to slap together an X86 server, write some management software, and they've at least got a complete product line to compete with HP. I imagine HP is grabbing 3COM to make a push towards SOHO/consumer markets because 3COM isn't relevant in any of those above listed markets either for the most part. Cisco is more worried about Juniper, Brocade, Arris, etc. They are aggressively competing with Cisco in a lot of important markets. Cisco can offer a 40-50% discount and still be unable to compete with some of these companies on pricing. Unless you really need some screwball exotic feature set that Cisco offers you can find feature/performance parity easily. Interoperability between vendors is much better these days so there's less vendor lock-in and more acceptable of mixed networks. You might use Cisco in the core but go elsewhere for almost everything else.
azim 17y ago
One thing to note: HP has been in the networking business for almost a decade. Most of 3com's products aren't necessarily new to HP but will instead augment the existing portfolio. http://www.procurve.com/ http://www.procurve.com/

ciupicri 17y ago

I wonder what will happen with the 3Com brand, because IMHO 3Com > HP when it comes to networking. I suppose that it will disappear, but after how long? For example the Thinkpad brand still exists even if it was bought by Lenovo some years ago, while the Compaq brand wasn't used too much.

wmf 17y ago
I wonder if the 3Com brand is worth anything these days. I haven't heard anything interesting from 3Com in years; the switching market is dominated by Cisco/Juniper/ProCurve/Brocade/Extreme and even smaller newcomers like Force10 seem to get more attention than 3Com.
- zackattack 17y ago
  Yeah, it's not like any 49ers fans are worried.
jsz0 17y ago
For branding 3COM would be better suited for the consumer market.

SwellJoe 17y ago

I held 3Com through a couple of years of steady decline back in the late '90s waiting for it to make a dent in Cisco. It never did, and I lost more on it that I've ever lost on any other stock. I don't have much confidence that HP management can alter that situation in any significant way. But then, I don't have much confidence in HP management since the Compaq merger, or even a few years before.

steveplace 17y ago

That news was soooo leaked before hand. Here's the stats on the option board today: - 8085 calls traded, 6 puts traded - 95% of those calls were bought on the ask - Open interest for the entire board was 13k, so very unusual. - Around noon, we had buys go at the offer (to open) for 3k Nov 5 calls and ~3k Dec 5 calls. Nice chunk of change for an overnight trade.

joseakle 17y ago
I'm sorry but i don't understand what it all means, would you care to explain?
- callmeed 17y ago
  From http://en.wikipedia.org/wiki/Call_option http://en.wikipedia.org/wiki/Call_option: "The buyer of a call option wants the price of the underlying instrument to rise in the future" I'm no expert but I think it means a lot of people knew this was going to happen and bought call options knowing the share price would rise. 3com closed at $5.69 and HP bought it for $7.90.
- BobbyH 17y ago
  Point by point explanation: * 3Com stock is up 35% (at $5.69) in after-hour trading because HP is offering a premium to the current stock price to acquire it. A call option to buy the stock for the fixed price of $5 (until it expired next Friday) sold for 80 cents when the market closed. * 3Com is up 2 bucks (35%) in the after market. The value of that call option will increase by around that mount. So the price of the option went up from 0.80 to ~2.80. That is an increase of 250%, which is way higher than 35%. This leverage is one reason people trade options. * The option buyer used a market order ("bought on the ask") to buy a ton of options, which is executed immediately at current market price. More cautious buyers tend to use a limit order in markets that don't trade a lot (like this one). A limit order will buy at no more, or sell at no less, than a specific price. This will move the market price less. * Given that the acquisition was announced later today, this large order of options is suspicious. This trade will almost certainly be investigated by the SEC.
- 17y ago

sireat 17y ago

The price seems rather "cheap", I didn't realize 3COM had fallen down so low.