Hewlett-Packard Buys 3Com for $2.7B; Ups Guidance

FILE - In this Sept. 28, 2007 file photo, 3Com Corp. offices are seen in Marlborough, Mass....

FILE - In this Sept. 28, 2007 file photo, 3Com Corp. offices are seen in Marlborough, Mass. Hewlett-Packard Co. on Wednesday, Nov. 11, 2009 said it has agreed to buy networking software and equipment maker 3Com Corp. for about $2.7 billion in cash. (AP Photo/Lisa Poole, file)

(AP)

Hewlett-Packard Co. said Wednesday it is buying the 3Com Corp. networking company for $2.7 billion, the latest move by the world's No. 1 personal computer maker to expand into areas more profitable than PCs.

HP also raised its 2010 guidance and reported preliminary quarterly earnings that topped Wall Street's forecasts. The company didn't provide specific reasons for its better outlook, other than a statement from CEO Mark Hurd that "significant growth in China" and "solid execution" helped HP in the quarter.

HP's stock slipped 35 cents to $49.65 while 3Com's shares leaped $1.98, or 35 percent, to $7.67 in extended trading after the announcements.

HP said it will give 3Com stockholders $7.90 per share and that the deal is expected to close in the first half of 2010. HP didn't address whether there would be layoffs at 3Com, which has 5,800 employees worldwide.

Co-founded by Robert Metcalfe, one of the inventors of the widely used Ethernet networking standard, 3Com is a former high-flyer whose business soared through the 1980s and 1990s but staggered after the dot-com meltdown. The company's shares briefly topped $100 in 2000, but in recent years have languished below $5.

HP's takeover comes after 3Com tried and failed to sell itself to the Bain Capital Partners private equity firm and a Chinese partner, Huawei Technologies Co.

That deal fell apart last year over national security concerns. One sticking point appeared to be 3Com's Tipping Point subsidiary, which makes network-security software. Lawmakers said they were worried sensitive military technology could be transferred to China.

HP's acquisition of 3Com, which doesn't appear to have the same hangups as the earlier deal, is at once a shot at networking leader Cisco Systems Inc. and a reminder of how a flurry of recent maneuvers by technology heavyweights is straining old relationships.

HP, which is based in Palo Alto, has been trying to muscle into Cisco's turf with its ProCurve line of networking gear. While growing, it is a small part of HP's business, accounting for less than 1 percent of HP's $83.6 billion in revenue in the nine months ended July 31.