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Hewlett-Packard announced after the bell Wednesday that it will acquire 3Com in a deal valued at $7.90 a share, or approximately $2.7 billion in cash, sending 3Com shares sharply higher in after-hours trading. Click Here to Get After-Hour Quotes for 3Com and HP.
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Also Wednesday, Hewlett-Packard announced preliminary results for the fiscal fourth quarter, putting its revenue at $30.8 billion, down 8 percent from the same time last year, and down 5 percent when adjusted for currency effects.
The acquisition of 3Com [COMS
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], which provides networking, switching, routing and security solutions, will expand HP's [HPQ
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] network gear business and strengthen its positioning in China, the company said in a press release.
"3Com has about 55 percent of revenue from China, which is going to expand HP's reach into that country," said Shannon Cross, an analyst at Cross Research. "HP is able to leverage its solid reach into the consumer market and then its strong and growing portfolio on the corporate side."
HP is the world's largest computer maker, and the economic downturn has been a drag on two of its core businesses, PCs and printer ink. The acquisition is a step toward HP's goal of diversifying into other areas.
Last year, HP bought Electronic Data Systems, helping its high-margin technology services group become its biggest revenue and profit generator.
"By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure strategy and bringing disruptive change to the networking industry," said Dave Donatelli, an executive vice president at HP.
3Com is in the midst of a strategic shift and has been making a push into the large enterprise market outside China with its H3C brand, trying to take on networking equipment giant Cisco Systems [CSCO
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"The products that 3Com brings to the table are not as broadly deployed or as technologically deep as Cisco's," said Charles King, an analyst at Pund-IT. "Still, it's a good move for HP to make if they want to play seriously against Cisco and get up to speed very quickly."
3Com will also provide HP with its TippingPoint portfolio, a network security system.
The acquisition has already been approved by the HP and 3Com directors, but it is pending regulatory approval, as well as the approval of 3Com stockholders. The deal is expected to be completed in the first half of 2010.
HP shares were lower in after-hours trading.
—Wire services contributed to this report
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Data is a real-time snapshot *Data is delayed at least 15 minutes