Hewlett-Packard to buy networking firm 3Com

SAN JOSE, Calif. – Hewlett-Packard Co. said Wednesday it is buying the 3Com Corp. networking company for $2.7 billion, the latest move by the world’s No. 1 personal computer maker to expand into more profitable areas than PCs.

HP also raised its 2010 guidance and reported preliminary quarterly earnings that topped Wall Street’s forecasts. The company didn’t provide specific reasons for its better outlook, other than a statement from CEO Mark Hurd that “significant growth in China” and “solid execution” helped HP in the quarter.

HP’s stock slipped 35 cents to $49.65 while 3Com’s shares leaped $1.96, or 34 percent, to $7.65 in extended trading after the announcements.

HP’s acquisition of 3Com is at once a shot at networking leader Cisco Systems Inc. and a reminder of how a flurry of recent maneuvers by technology heavyweights is straining old relationships.

HP has been trying to muscle into Cisco’s turf with its ProCurve line of networking gear. While growing, it is a small part of HP’s business, accounting for less than 1 percent of HP’s $83.6 billion in revenue in the nine months ended July 31.

HP and Cisco have been longtime partners, but the two companies lately have been squaring off in areas in which they’ve never competed before. As HP pushes into networking, Cisco is pushing into computer servers.

It’s a dynamic playing out across the technology world, particularly with database leader Oracle Corp.’s proposed $7.4 billion acquisition of Sun Microsystems Inc., the world’s No. 4 server maker behind IBM Corp., HP and Dell Inc. That deal has been approved in the U.S. but is being held up over antitrust concerns in Europe.

Hardware companies are buying their way in to more profitable markets as their margins shrink with trends like cheaper PCs called “netbooks” and a shift toward cheaper servers catching on.

HP said it will give 3Com stockholders $7.90 per share.