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Rumours suggest HP will spin off its networking business unit ProCurve, with venture capitalists circling hungrily. The final home of ProCurve is likely to be in the belly of another networking player, however. There is a long list of companies that could use ProCurve to broaden their portfolios, but which one will end up bagging the brand?

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By  Simon Duddy Published  August 29, 2005

If HP sells ProCurve, who will buy?|~||~||~|Rumours suggest HP will spin off its networking business unit ProCurve, with venture capitalists circling hungrily. The final home of ProCurve is likely to be in the belly of another networking player, however. There is a long list of companies that could use ProCurve to broaden their portfolios, but which one will end up bagging the brand? HP has devoted a lot of energy into building up the ProCurve business unit but rumours suggest the pay-off has not been sweet enough for the Palo Alto-based printer giant. Carly Fiorina tried to sell off ProCurve while she was in charge and it seems that new CEO Mark Hurd is set to carry out the plan. Despite not hitting HP’s high hopes, ProCurve is a healthy entity with market leading numbers in some networking segments. In the 12 months ending March 31, 2005, it clocked up US$451.3 million in sales, a rise of 17% from the previous 12 months, according to research firm Dell'Oro Group. ProCurve was listed in the challenger quadrant in the 2004 Magic Quadrant for Global Campus LANs report prepared by research and advisory firm Gartner. Furthermore, as recently as July it announced plans to add approximately 100 skilled partners to its ProCurve networking programme in the Middle East. Clearly, this is not an ailing business in desperate need of salvation. If HP decides to sell it, and it would appear that US-based venture capitalists are in the running, the business unit could fetch close to US$800 million. Healthy though ProCurve is, the networking business is going through a period of consolidation, with smaller vendors under increasing pressure to step up or sell out. ProCurve as a company in its own right would do well but it would have no better chance of challenging Cisco than as part of HP. So the natural step is that ProCurve will be swallowed by another networking player looking to edge closer to Cisco. So, who would be the main candidates to acquire ProCurve? NME gives the lowdown on the potential buyers: Huawei: The Chinese data player is fast spreading from its Asian heartland, with ambitious plans to establish a foothold in the worldwide market. Its strongest suit at the moment is telco equipment, but it is also targeting the enterprise market. Bringing ProCurve into the fold would give it an instant mix of established lower-end network product lines, pervasive channel infrastructure and powerful brand. Cash-rich Huawei should have the money to buy HP’s networking unit. The only stumbling block is Huawei’s relationship with 3Com, which could not conceivably survive the fall-out of such an acquisition. Chinese PC vendor Lenovo buying IBM’s notebook business is an example of the increasing power of China, could Huawei be about to follow in Lenovo’s footsteps? Juniper: Rumour has it that HP once considered buying Cisco’s main router rival Juniper. Arguably the sale would have given HP the tools to chip away a sizeable chunk of Cisco’s business. Perhaps HP’s directors saw the deal as a last chance for ProCurve to take the step up to the first tier of networking vendors? Now Juniper might acquire ProCurve. It would give the telco and high-end enterprise vendor immediate reach into the lower-end enterprise and the SMB sector. ProCurve is strong in wireless networking and lower end Ethernet switches and these would complement Juniper’s existing high-end offering. The vendor could certainly afford ProCurve having recently spent billions to snap up Netscreen, Peribit and Redline, in order to further penetrate the enterprise market. A voice player: The voice and data worlds are converging and if a voice player wants to get a foothold in data networking to bolster its overall offering, ProCurve would be a fine choice. ProCurve already has a deep relationship with Canadian voice vendor Mitel, making it the prime choice. It’s hard to gauge, however, whether privately held Mitel has the clout to buy ProCurve. Avaya on the other hand, has the cash on hand to do just that, making it a prime contender. Foundry / Extreme: The ProCurve product portfolio would complement the high-end products of Foundry and Extreme but both companies are around the same size as ProCurve, which casts doubt on how either could afford it. Cisco: You must be joking!||**||

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