In a deal first announced in November 2009, the European Commission has notified HP that it will not stand in the way of the company's $2.7 billion bid to acquire 3Com.
"The Commission concluded that the concentration would be unlikely to riase competition concerns," the EC said in a statement, adding that "the merged company would continue to face a number of global and effective competitors, giving customers the choice from a range of alternative providers for switches and routers."
No conditions were attached to the approval, and HP said it expects to close the deal by the end of June. However, China's competition regulator, the Ministry of Commerce, or Mofcom, hasn't yet ruled on the takeover, though the deal doesn't pose much threat to competition in China.
Both companies build networking products and by adding 3Com to its portfolio, HP will increase its position in the core networking space, as well as increase its competition with Cisco Systems.
3Com on Wednesday reported financial results for its fiscal 2010 second quarter ending November 27, 2009, and the results came as a bit of a surprise to Wall Street analysts. The company reported $322.2 million in second quarter revenue, compared to revenue of $354.6 million in the same quarter one year ago.
While that represents a drop of 9.1 percent, revenue increased sequentially to the tune of 10.9 percent, from $290.5 million. According to 3Com, revenue grew sequentially across all major sales regions, a feat the company attributes to a "solid recovery" in several international regions.
"We are pleased with 3Com's performance in the quarter," said Bab Mao, 3Com's Chief Executive Officer. "We exceeded our guidance for revenue, operating profit, earnings per share, and our cash balance, while delivering sequential revenue growth across all our sales regions and achieving record gross and operating margins."
3Com's net income in the quarter was $20.0 million, or $0.05 per diluted share, compared with net income of $12.9 million, or $0.03 per diluted share, in the same quarter one year ago.
3Com's board of directors and the company's shareholders appear to be at odds over a proposed $2.7 billion merger agreement with HP that was announced last week. Displeased with the potential merger, the shareholders have filed a class action lawsuit in hopes of preventing the deal.
The complaint names the entire company's board of directors and accuses the defendants of attempting to deceive 3Com shareholders by agreeing to a deal that undermines the true value of their investment in the company, TechCrunch reports.
Under terms of the agreement, HP would pay stockholders of 3Com $7.90 per share, but the bankruptcy lawyer who filed the case on behalf of the plaintiffs argues that 3Com's directors should have insisted on a higher price.
In a blockbuster deal, Hewlett Packard on Wednesday announced it has entered into a definitive agreement to purchase 3Com at a price of $7.90 per share. That breaks down to about $2.7 billion and puts HP, which is already a strong networking company, in a better position to compete with Cisco.
"“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, Enterprise Servers and Networking, HP. "By acquiring 3Com, we are accelerating the execution of our Converged Infrastructure strategy and bringing disruptive change to the networking industry. 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."
The acquisition will help HP build its networking portfolio, particularly in expanding the company's Ethernet switching offerings and routing solutions, HP said the move will also help strengthen its position in the fast growing Chinese market.
Terms of the transaction have already been approved by the HP and 3Com board of directors and is expected to close in the first half of 2010.