HP-3Com Deal Puts Pressure on Rivals

Silicon Valley/San Jose Business Journal reports: The $2.7B purchase of 3Com by Hewlett-Packard is changing the way analysts and investors view competitors Cisco Systems and Brocade Communications.

Both companies' stock slipped in after-hours trading following Wednesday's announcement of the HP deal.

San Jose-based Brocade was down nearly 10 percent, at $8.36, and was downgraded by analysts from Lazard Capital and ThinkEquity. The company had been speculated as a takeover target after a Wall Street Journal article last month said it was in play, but that possibility appears less likely now, and it has a much stronger competitor. In midmorning trading Brocade was down 12 percent, to $8.18.

San Jose-based Cisco, a networking equipment market leader, is clearly in the crosshairs of Palo Alto-based HP now.

“I’ve been looking forward to this moment and am looking forward to building some scale and taking on the other guys,” said Ron Sege, president and COO of 3Com, during a conference call about the deal.

Marius Haas, senior vice president and general manager, HP ProCurve Networking, agreed with Sege.

“We are the clear No. 2 in the networking space,” Haas said.

Cisco issued a statement overnight: "While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT. As the leader in the networking market, Cisco is very confident in our business strategy, commitment to product innovation, and ability to provide strategic business value to our customers in a highly competitive marketplace."

The company's stock was down about 1 percent in overnight trading at $23.73. By midmorning it was about the same.