HP Buying 3Com

Hewlett-Packard Co. agreed to purchase 3Com Corp., a provider of networking switching, routing, and security products, for about $2.7 billion, the companies said Wednesday.

Palo Alto, California-based HP and Marlborough, Massachusetts-based 3Com said the price works out to $7.90 per share in cash. That is a 39 percent premium over 3Com's closing price of $5.69 on Wednesday before the deal was announced.

“This combination will transform the networking industry and underscore HP’s next-generation data center strategy built on the convergence of servers, storage, networking, management, facilities, and services,” the companies said. “The resulting business outcome will help customers simplify the network, deploy a unique and innovative edge-to-core network fabric for the enterprise, and improve IT service delivery capabilities, all delivered with best-in-class price performance.”

The acquisition of 3Com will dramatically expand HP’s ethernet switching offerings, add routing solutions, and significantly strengthen the company’s position in China—one of the world’s fastest-growing markets.

In addition, the combination will add a large research and development team in China that will drive the acceleration of innovations to HP’s networking solutions.

3Com has about 5,868 employees worldwide. The company was founded in 1979 and first headquartered in Santa Clara, California, but left there in 2003 for Massachusetts. Sunnyvale, California-based Palm Inc. was spun off 3Com in 2000.

Bain Capital agreed to buy the company for $2.2 billion in 2007, but that deal died amid U.S. regulatory opposition in early 2008.

The new transaction is expected to close in the first half of calendar 2010.

3Com also makes network security capabilities through its TippingPoint portfolio, which has been recognized for excellence for the past four years by the Gartner Group.

HP anticipates that the transaction will be slightly dilutive to fiscal 2010 non-GAAP earnings.