HP Goes Up Against Cisco In Data Center Wars

HP (HPQ) took a bold step on Thursday when it bought a company that pits it directly against Cisco Systems Inc. (CSCO) in the data center wars.

HP is buying Ethernet pioneer 3Com Corp. (COMS) for $2.7 billion; both boards of directors have approved the deal.

“Companies are looking for ways to break free from the business limitations imposed by a networking paradigm that has been dominated by a single vendor,” said Dave Donatelli, executive vice president and general manager of HP’s enterprise servers and networking unit. “By acquiring 3Com, we are accelerating the execution of our converged infrastructure strategy and bringing disruptive change to the networking industry.”

HP said the acquisition will “significantly strengthen” its position in China, one of the fastest-growing markets in the world.

The deal surprised analysts, who expected HP was on the verge of buying Brocade Communications Systems Inc.

HP’s stock closed 4 cents higher at $50 on Wednesday. The merger is expected to close in the first half of 2010.