Financial analysts see HP's pending purchase of 3Com as a threat to Cisco because it means 3Com Ethernet switches that are inexpensive and very popular in China will have better access to businesses via well-established HP sales channels.
"We see HP's acquisition as primarily a response to Cisco's converged network/CPU strategy," writes Catharine Trebnick, an analyst with Avian Securities. "With Cisco owning the bulk of the enterprise Ethernet market, they have the most to lose if HP is successful in integrating the 3Com portfolio."
Trebnick says HP's 3Com acquisition is filling a gap in its high-end networking to better compete with Cisco, and that 3Com's success in China will be a boon to HP.
"Our conversations indicate that HP is well on its way to successfully maintaining [3Com's] China presence," she writes in a memo reacting to news of the deal.
Nikos Theodosopoulos and Jack Monti of UBS Warburg write that Cisco faces a long-term threat from the beefed-up HP because it could come at Cisco with aggressive pricing. 3Com's plan has been to sell its low-cost H-3C gear that is popular in China in countries around the world, they say. Trebnick is also optimistic that HP can use its established sales channels to expand 3Com's market share in North America where "success has been limited."
"This acquisition has negative implications for every other provider of networking equipment," Trebnick says, spelling out some specifics, with Cisco being the main target with the most to lose by the new HP.
She says it seems logical that if HP wants to compete with Cisco on all fronts, it needs to make more purchases, possibly Avaya for unified communications and Polycom for telepresence and videoconferencing gear.