The decision by Hewlett-Packard Co to invest a significant sum in 3Com Corp – at current prices, a 5% stake would cost around $37m, and the implication is that it will be standing behind the company to increase its stake whenever 3Com needs more cash (CI No 1,122), underlines how serious Hewlett is about establishing a strong position in networking and data communications. Over the past year, we’ve seen the company buy outright Eon Systems Inc, which makes local area network monitoring systems; buy a 35% stake in Network Control Systems SpA of Italy; and an 8% stake with an option to take it to 20% in Octel Communications Corp, whose speech processing products it markets in Europe. In addition, it is seeking a prominent role in the emerging market for network management systems in competition with the likes of IBM Corp and AT&T Co. Under the agreement with 3Com, first products are due out in the second half of the year, both companies will market them through their own distribution channels, but Hewlett will maintain all installations. Although Hewlett will clearly be there if 3Com does need more cash, no new shares are being created to start with – Hewlett will be buying in the market. With first quarter orders up 17% against hopes of as high as 25%, Hewlett-Packard Co shares came under pressure in the market after its figures came out on Tuesday (CI No 1,121), and the company saw the price record a two-day fall of $3.75 to $56.25.
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