"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 for HP's enterprise servers and networking group.

The move is the latest skirmish between HP and Cisco. In 2005, Cisco started building servers and HP responded by putting funding and new management behind its ProCurve networking gear. With the 3Com acquisition, it's game on.

Data-Center Showdown

"Businesses are expected to spend $100 billion on data-center software and hardware this year, research company IDC forecasts," explained The Wall Street Journal's Stephen Grocer. "And tech companies don't want to share those data-center dollars any more. They want to be the one-stop shop for customers."

"By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure strategy and bringing disruptive change to the networking industry," Donatelli said. "By combining HP ProCurve offerings 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."

3Com CEO Bob Mao said the combined company will have strong synergies. "Our extensive product line and innovative technology, together with HP's breadth and scale, will expand our global opportunity," Mao said. He boasted that 3Com's products deliver "better performance, require less power, and eliminate administrative complexity."

3Com's major market segments are banks, ISPs, utilities and retailers. With 3Com under its belt, HP will compete vigorously in China, the company said.

Focus on China

The deal is bad news for Brocade, which had hoped to cut a partnership deal with HP. Brocade is for sale. The 3Com acquisition "fills most of the holes in HP's networking portfolio" and "likely takes any potential partnership (with Brocade) off the table," analysts with Lazard Ltd. said.

With HP out of the picture for Brocade, "we believe there are only a few, very low-probability potential acquirers remaining," Piper Jaffray analysts wrote in a note.

Writing on The Street.com, David McDougal said the deal highlights two aspects of HP's strategy. "First, Hewlett-Packard is eager to gain exposure to China's infrastructure-development needs and predicts a big value to be gained from conducting operations there," McDougal said.

In addition, HP is taking on Cisco head-to-head and can bring its $13 billion in cash reserves to the battle, McDougal said. And HP can benefit by selling 3Com equipment to its existing consulting and hardware customers.

"HP's acquisition is both aggressive and smart," McDougal said.

"We are confident that we can run our entire global business of 300,000-plus employees, including our next-generation data centers, entirely on the new HP networking solutions," said Randy Mott, HP executive vice president and CIO. "Based on our experience and extensive testing of 3Com's products, we are planning to undertake a global rollout within HP as soon as possible after the completion of the acquisition."