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Hewlett-Packard to acquire 3Com for $2.7 billion

November 12, 2009|Associated Press

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

HP of Palo Alto 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 Chief Executive Mark Hurd that "significant growth in China" and "solid execution" helped HP in the quarter.

HP's stock closed up 4 cents at $50 before slipping 35 cents after the announcements to $49.65. 3Com rose 28 cents to $5.69 during regular trading, then leaped $1.96, or 34%, to $7.65.

HP's acquisition of 3Com is a shot at networking leader Cisco Systems Inc. HP has been trying to muscle into Cisco's turf with its ProCurve line of networking gear, which accounted for less than 1% of HP's $83.6 billion in revenue in the nine months that ended July 31.

HP said the 3Com products would be folded into HP's own networking equipment business. HP said the deal would add new products to its line and help expand its presence in China.

HP also said customers wanted more than one vendor in a sector dominated by Cisco.

The company said it would give 3Com stockholders $7.90 a share. Both HP's and 3Com's boards have approved the deal, which HP expects will close in the first half of 2010.

HP said it now expects full fiscal year 2010 revenue of $118 billion to $119 billion. The previous estimate was $117 billion to $118 billion.

Net income is expected to be $3.65 to $3.75 a share, or $4.25 to $4.35 excluding one-time charges.

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