HP and 3Com fit remarkably well together when considering the target markets that drove them together in this week's blockbuster $2.7 billion deal: core Ethernet switching and China. But most of the rest – lowend, SMB and edge switching, plus wireless networking – faces considerable overlap.
Fortunately for HP, the overlap should be a minor distraction to what the company views as the real big game: next generation data centres, where unified switching fabrics, virtualisation and consolidated compute/storage and networking operations will drive spending into the next decade.
With the 3Com buy, HP inherits the S 12500 and S 5800 data centre core and aggregation switches. Up to now, HP could not address high density aggregation and core switching applications in data centres.
3Com also brings enterprise edge and core routing to HP.
"It gives us an edge-to-core [story] that we didn't have before," says Marius Haas, senior vice president and general manager of HP's ProCurve Networking business.
"HP will be building a credible alternative to UCS, which is where a lot of the action is in data centres right now," says Rob Whiteley of Forrester Research. "The gloves are off and these two will make great competitors in the long run."
HP and 3Com personnel further from the data centre action have to be quivering though. Both companies are hallmarks in lowend and SMB networking where product rationalisation will be most significant.
HP's lowend Ethernet switch lineup is virtually identical to 3Com's: a variable mix of stackable and standalone fixed configuration and modular Layer 2 and Layer 3 10/100/1000/10000Mbps Ethernet managed and unmanaged, PoE and non-PoE switches for practically any edge or campus application. Both companies have been competing fiercely in this market based on low price, simple features, ease of use and lifetime warranties.
HP will have to base its rationalisation decisions on which product line is newer and more feature laden, analysts say."Whoever has newer/faster/better/more will get the nod," says Steve Schuchart of Current Analysis.
That will be a tall task given the rapid pace of enhancements and extensions HP and 3Com have been unveiling on their lowend switches over the last several years, such as Gigabit Ethernet and POE Plus.
Specifically, will there be a fit for both HP's ProCurve 8212 and 5400 series switches, and 3Com's S7500E and S7900E? How about the ProCurve 2910 and 3500 vs. 3Com's 4500G and 4800G, which all support comparable port densities and price?
"It will be interesting to see what HP keeps because the 3Com portfolio has been developed over the last 18 months, it's more recent," says Zeus Kerravala, an analyst at the Yankee Group. "I expect to see most of the 3Com portfolio live."
HP says the integration issue will be an easy one due to standards compliance and what it views as little to no overlap.
"These are open products that can interoperate with any other product that is already available in someone's network," said David Donatelli, HP's executive vice president and general manager of Enterprise Servers and Networking, during a conference call this week on the acquisition. "And again, due to the fact that there is very little overlap, these products complement themselves very well. So we are ready to go to market day one with the portfolio."
Another area of direct HP/3Com overlap is in wireless LANs. That product rationalization should be much easier, however.
3Com has an OEM arrangement with Trapeze Networks but HP bought Colubris last year. Naturally, HP is expected to continue on with the Colubris product line.
But there are also product synergies in addition to core switching and edge routing. HP inherits a VoIP product line in the 3Com NBX and VCX IP PBX and handset portfolio.
3Com has less than 0.5% share of the total $16 billion enterprise telephony market however, according to Dell'Oro Group; but that's still more than the 0% HP has, which up to now addressed the market through partnerships with Avaya and Microsoft, among others.
"I think they'll continue to partner with Microsoft and Avaya, but I think they should keep [the 3Com VoIP products] and refresh them," Kerravala says.
And 3Com's TippingPoint business gives HP security products it either had to partner to obtain or could not offer customers at all. TippingPoint's product line consists of threat management and intrusion prevention appliances installed in 30% of the Fortune 1000. "This is huge for HP, it gives them legitimate network security," says CurrentAnalysis' Schuchart.