HP to buy 3Com for $2.7 billion

Tagged: 3Com, HP, Computer Hardware, Technology
Source: CNNMoney.com - Read the full article
Posted: 4 years 41 weeks ago

Hewlett-Packard Co. announced Wednesday it will purchase networking company 3Com for $2.7 billion, and also preannounced higher fiscal fourth-quarter earnings and raised its outlook for fiscal 2010.

The deal is worth $7.90 per share of 3Com, which is 39% higher than the stock's closing price of $5.69 on Wednesday. Shares of 3Com (COMS) soared 35% after hours on the announcement.

"By combining HP ... with 3Com's extensive set of solutions, we will enable customers to build a next-generation network infrastructure that supports customer needs from the edge of the network to the heart of the data center," said Dave Donatelli, HP's vice president of networking, in a statement.

3Com took in $1.3 billion in revenue last year on its networking and securities solutions products. The Marlborough, Mass.-based company mostly does business with corporate clients, and its H3C networking unit is a market leader in China.

HP (HPQ, Fortune 500) said it made the acquisition to expand its networking solutions offerings and to "significantly strengthen the company's position in China."

Over the past year, HP has increased its services and business solutions business exponentially, catapulted by its $13.9 billion acquisition of services firm EDS in 2008.

Better outlook: In addition to the 3Com acquisition, HP also announced preliminary financial results for the its fiscal fourth quarter ended in October. The tech giant said it will report earnings of 99 cents per share, up 18% from last year. Excluding one-time items, earnings were $1.14 per share, HP said.

Revenue will come in at $30.8 billion, which was down 8% from a year ago, the company added.

Analysts surveyed by Thomson Reuters, who typically exclude one-time items in their estimates, expected earnings of $1.12 per share and revenue of $29.8 billion.

HP also upped its guidance for fiscal 2010. The company said it will record revenue between $118 billion and $119 billion, up from its previous estimate of $117 billion to $118 billion. The new outlook is mostly higher than analysts' consensus estimate of $118.2 billion.

Full-year earnings per share estimates were increased to $3.65 to $3.75, up from its previous estimate of $3.60 to $3.70. Excluding one-time items, HP said it would earn between $4.25 to $4.35 per share, mostly higher than analysts' forecast of $4.28.

"Solid execution drove exceptional performance for HP this quarter, fueled by significant growth in China," said Mark Hurd, HP's chief executive in a statement. "We are delivering on our strategy and are well positioned going into 2010."

HP, a Dow Jones industrial average component, will report its full, final financial results on Nov. 23. Its shares fell 0.5% to $49.75 in after-hours trading. To top of page