HP and 3Com merge- projection and customer effect

 

 

 

So as almost everyone has heard by now, HP has purchased 3Com for $2.7B. While all of the final signatures are not in place, it looks like this is most definitely going to happen. Yesterday I received an email from Alex Dobson, the VP and GM of 3Com North America (full letter is below). The letter was focused on sales partners like myself, but it got me thinking about how this is going to effect my customers.

 First , the 30,000 ft overview from everything I can collect so far. When this goes through, HP will have enterprise Ethernet switching options (through H3C), routing, VoIP, security (through TippingPoint) and even telephony (through NBX). So HP has the potential to go from the core to the edge with products in almost every category in the data center. I don’t think HP is going to rebrand and start selling all of these products (especially the NBX). They might become integrated into current HP products or a new product line, but HP is definitely not going to start off by biting off more than they can chew. In the near future, I expect HP to leave 3Com alone and not force the companies to merge quickly and have similar product lines compete. I think HP has learned this lesson from EVA and MSA which competed with each other (and still do) at the detriment of HP.

This acquisition will give HP the horsepower to be more competitive with Cisco’s networking superiority (and ego). Cisco is very comfortable with their 70% of the networking share. Their annual profit shows that they do not feel as if they have competition and can price accordingly. The new HP/3Com line should be able to change some of that. With 3Com technologies, over the next few years HP should be able to product a line of products that are comparable to most of Cisco’s networking line-up. HP (and 3Com) have both done a very good job competing with low end Cisco and price (including warranty/support price) has been a large driver in that. If HP can start to move up the enterprise network ladder, I think they can provide comparable and much less expensive products than Cisco. This will either provide a large market share increase for HP or a drop in price from Cisco (probably a combination of both).

 From the perspective of the customer, not much will change right now. According to this letter from Alex Dobson, it’s business as usual at 3Com (probably not so, but they are at least selling like it is). If this acquisition moves along the standard track, HP will probably begin phasing out 3Com products over the next 12-24 months. However, HP will probably keep a decent number of 3Com techs around to support the legacy 3Com products well past the product end of life. How well this service goes will weigh in heavily on the 3Com customer’s decision to move to HP or Cisco. I’m guessing HP ProCurve will continue with their same immediate product line releases as well. For the next 12-18 months I’m guessing the only change will really occur for current 3Com customers who will see their current products go end-of-life. They will need to make an HP or Cisco (or Brocade) decision for their immediate needs.

The real customer change will happen around the 2011 time. I’m guessing that is when HP will begin releasing Enterprise networking that will give customers an HP or Cisco choice. Current Cisco customers should see a price break as Cisco will need to drop their prices to stay in line with HP. I don’t think SMARTnet is going anywhere and it shouldn’t, while it isn’t free like other manufacturers support, it has value comparable to it’s price. At that same time, unhappy Cisco customers along with non-Cisco customers will then have a choice to look at the HP line. While Cisco has always dedicated a lot of budget towards R&D, we will see a lot of HP focus on R&D for this new networking product line and that should bring about some great new product features. This development fight will only benefit everyone.

The wild card here is Cisco’s new SmallBiz Pro product line. Cisco made a pre-emptive (psychic… maybe) move and came out with a product line for small business that competes directly with HP ProCurve and 3Com’s line. This Cisco product addresses a number of customer complaints (support price and GUI interface) but still has Cisco engineering. I feel as if Cisco’s migration of the small business line along with their enterprise products might keep Cisco a step ahead of HP on this one.

No matter how you slice it, the 3Com acquisition is going to change the entire networking world. Customer’s will be the ones who benefit most as this will bring about choice. And this choice will yield lower prices, increased product development and a merged network structure that will allow products to play nice with each other.