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3Com deal set to intensify HP-Cisco scrap

Analysts predict enterprise battle will heat up following latest round of consolidation

3Com deal set to intensify HP-Cisco scrap
HP’s acquisition of 3Com will strengthen its networking capabilities as it attempts to fight Cisco in the enterprise sector.

HP's acquisition of 3Com will bolster its enterprise networking capabilities and give it the impetus to take the fight to Cisco, according to initial reaction from analysts to news of the US$2.7 billion tie-up.

As the industry begins to evaluate the various implications that the deal will have for customers and partners of both companies, analysts are in no doubt that it is poised to shake up the networking market.

Adam Jura, senior analyst at consulting firm Ovum, believes the deal spices up the competitive battle between HP and sector heavyweight Cisco.

"HP had already started to encroach upon Cisco's market with its Procurve product line, however the acquisition of 3Com provides a serious boost to its data centre credentials," he said.

HP is likely to offer 3Com's extended network capabilities - including its TippointPoint technology - to existing customers in a bid to boost wallet share, while the takeover should allow it to gain extra traction in markets such as energy, education and transportation, where 3Com is reputed to be strong.

Analysts also point out that the move will strengthen HP's position in the burgeoning Chinese market.  

Ovum's Jura is intrigued to find out how Cisco will respond to two of its main rivals joining forces, pointing out that it boasts the financial clout to hit back with a game-changing acquisition of its own if necessary.

"Cisco is currently holding around US$4.7bn in cash and equivalents on its balance sheet although this figure has dropped in recent quarters," he said. "It does afford the company the opportunity to make an acquisition, however Ovum does not expect anything immediately. The logical choice would be EMC and as such market rumours continue to abound."

Cisco has not yet commented directly on the HP-3com deal, but a blog posting by an executive on its website acknowledged that "acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT."

The statement added: "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 market place."

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