With HP’s announcement of the acquisition of 3Com for $2.7 billion it will be known as the day the HP Cisco “cold war” escalated to full on war.

November 11, 2009 was the day the opening shot of the Cisco HP Networking and Server War was fired.

I sat down yesterday evening with HP’s Senior Vice President Marius Haas, and general manager of the ProCurve Networking business. The goal was to get better perspective on how the 3Com acquisition we reported on yesterday fit within the organization, and boy did he ‘bring it’ with this interview.

We had a very candid talk about HP’s acquisition of 3Com for $2.7 billion as well as the competitive strategy against Cisco.  It’s refreshing to see HP bring the “eye of the tiger” to competing.  Unlike the old HP where they got pushed around a lot the new HP is not taking any crap from Cisco.

It’s a direct frontal competitive war in the networking space.  Procurve is not the unit that will take on Cisco and I expect the Procurve team headed up by Marius to tap into other companies resources in this war.

Here is my exclusive audio interview from my face to face meeting with  HP’s Marius former head of M&A for 5 years recently the general of the Procurve division in the role of senior vice president and general manager. It’s clear that Marius has “the juice” to compete.

Topics on the audio:  1) About the 3Com deal, 2) HP’s M&A strategy and playbook, 3) M&A integration plans, and 3) Cisco War

Download the MP3 or Listen Below

Our prior coverage on the HP acquisition news as it broke:

Breaking News: HP Set to Acquire 3Com for $2.7 Billion
Cisco’s Joel Earnhardt responds to the news of the acquisition
John’s Pre-interview Brief

My Angle: This is going to be fun to cover.

It’s been widely documented that Cisco has an adjacent market competitive strategy where they are moving into all kinds of new markets where they traditionally partnered.  One of those markets was servers.  It didn’t take HP long to wake up to that.  So since then we’ve had this kind of “cold war” until now.

This is a flat out direct warfare for HP.  Just listen to my interview podcast and hear directly from HP’s Marius Haas.

On Cisco response to the deal Marius says:

“…if you go down a couple levels down in the [Cisco] organization someone there is saying ‘Oh shit!’ They are fearing now that up and down the stack we now have a better value proposition and better platform in every layer in the architecture than Cisco has.”

“What helps HP is that they are trying to push for a platform upgrade and customers are saying wait a minute I don’t want to make another 10 year investment in a proprietary stack especially one that is expensive … customers are looking for a viable alternative from a company that can deliver and a will be around tomorrow…”

This is as clear as you can get – HP is taking on Cisco.

For HP networking was an area where they had a great product but it was incomplete.  HP went out and filled their product portfolio with this acquisition.

It’s a paradigm shift in the networking business where HP now brings scale and credibility to an alternative to Cisco that was never there before.  For HP this is about giving enterprise customers choice. HP is directly competing with Cisco and they have no problem sharing that with me.

HP has a great chance to compete head to head with Cisco.  Cisco has a strong position in top enterprise accounts with a breath of products.  Other companies have failed to compete with Cisco mainly because those companies never really had a “seat at the CIO table”.  Additionally Cisco HP and Cisco both have CIO relationships, but HP never had the full networking solution to unseat Cisco in these large accounts – until now.

HP is #1 in PCs and Printers and now with a complete networking solution.  HP actually has the muscle to take some share in the enterprise because they have years experience selling into the enterprise like Cisco.

Cisco’s key asset isn’t product leadership but sales operations – and Cisco has beaten many competitors by employing a price subsidize strategy in offering discounts to preserve the business under a competitive threat. That monopolistic approach works with networking startups but it’s harder with "fully geared up HP".

HP can compete head on with Cisco on price, product, and cross subsidizing pricing to gain share, so in other words, HP can now compete on value.

Cisco’s Biggest Problem May Be Their Product

Here’s Cisco’s big problem:  according to Marius Cisco is asking their customers to do a full platform refresh that would put the enterprise into another 10 year lock in.  HP hopes to sell against Cisco by offering an end-to-end solution that is open not vendor lock based but instead value based.

HP has a innovative M&A with focus on integration.  Marius has a track record in running M&A for 5 years and has been stellar at deals and integration.  He is very competitive (an a good guy).  He welcomes the opportunity to compete with Cisco.  HP isn’t holding back on the Cisco question.  Marius is very confident and aggressive against Cisco.

The acquisition is expected to close 1^st half 2010.

Clear message with HP 3Com deal – HP is saying to Cisco:  “We’ve got end-to-end. You’ve got to be scared. We’ll bring it”.

Background Information on How HP Decided on 3Com

1) Product Portfolio – its high class enterprise grade solutions that HP will be putting in all their datacenter as proof points that they stand by this solution;

2) 3Com built a platform and built scale in China with 2500 engineers in China optimized the architecture.  Grew it to 32% market share in China with 3500 employees in China of which 2500 are engineers – instant market presence in China which is a tough thing to do.

– HP looked at most of the main players out there.

– 3Com passed the internal M&A filter at HP:  1) strategic fit, 2) architecture and product fit, 3) financial fit

– Prior to the deal decision HP spent over 8 weeks fully integrating and testing the 3Com technology and products.  Specifically they full integrated 3Com with hp’s network and equipment.

– EDS was part of the decision to ensure that they can deploy immediately within accounts.

– Major 3Com benefits to HP:  1) power mgt, 2) operations mgt, 3) price performance : 2x for ½ cost, 4) scalability: much great density than anything out there; 5) Bonus: security around 3Com’s TippingPoint intrusion detection and prevention.

– Acquiring 3Com takes HP into data center networking hardware territory and gives it the ability to deliver comprehensive, end-to-end solutions for customers

– 3Com completely rebuilt their platform architecture over past few years

– Market share in china 30/32 % in top accounts

– What was most attractive to HP: 3Com had a solid IP Patent portfolio that they leveraged to build a great platform and gain share in China.

HP ships more VM solutions than anyone else.

Blogosphere Reactions Worth Reading

There were only a handful of reactions from credible sources around the web yesterday worth pointing out, and in particular there were two blog posts worth reading from yesterday’s coverage:

Computerworld’s Tony Bradley and ZDNet’s Larry Dignan.

Here is some perspective from Tony Bradley at Computerworld

The gloves are off now in the fight for the data center. Cisco has operated largely unchallenged in providing routing and networking equipment for data centers, but with the purchase of 3Com, HP is poised to go head-to-head with Cisco.

And the are some perspectives from Larry Dignan

The HP jabs against Cisco were unmistakable on Wednesday. HP in its statement said:

“This combination will transform the networking industry and underscore HP’s next-generation data center strategy built on the convergence of servers, storage, networking, management, facilities and services.”

Translation: HP isn’t going to let Cisco dictate data center architecture.

“Companies are looking for ways to break free from the business limitations imposed by a networking paradigm.”

Translation: HP wants to free you from Cisco (and lock you into HP of course).

“By combining HP ProCurve offerings with 3Com’s extensive set of solutions, we will enable customers to build a next-generation network infrastructure.”

Translation: HP is hitting Cisco in its core business since the networking giant is targeting servers.

“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, CIO of HP.

Translation: We’ll eat our own networking dog food as a proof of concept.

Bottom line from HP: This about giving enterprise customers choice.  It’s a paradigm shift in the networking business where HP now brings scale and credibility to an alternative to Cisco that was never there before.