Another Landmark Reached in HP Integration of 3Com, but Work Remains

Journalists and pundits who’ve never crossed over to the “dark side” — that is, worked directly for an industry vendor — often are enamored of mergers and acquisitions (M&A). They think they’re exciting, the eminently newsworthy apotheoses and syntheses of bi-coastal wheeling and dealing on Sand Hill Road and Wall Street. These observers see the glamor and commercial promise of M&A, but they don’t see the considerable drudgery and risk that accompany such transactions.

The fact is, most acquisitions ultimately end in tears for somebody, sometimes for everybody. Involving human beings as well as high-flying concepts, they typically are messy affairs. They rarely follow a script, unless that script is written by the Marquis de Sade. Oh, and did I mention lawyers, lots of them, are involved?

And that just covers the onset and negotiation of a deal. Closing a deal, integrating the merged companies, that’s a seriously daunting proposition in its own right.  It’s where corporate combinations can and do come off the rails, sometimes fireballing into oblivion. It’s not a simple exercise to integrate people, cultures, strategic plans, product portfolios, channels and channel strategies, go-to-market plans, field-sales remuneration schemes, back-end systems, and — lest we forget — management and executive teams.

If executive and board members had accurate premonitions of what such transactions would entail, there would be far fewer M&A deals. (At about his point, my investment-banking readers are ordering custom-made voodoo dolls of yours truly. But, hey, I must speak the truth, if for no other reason that I have an unnatural compulsion to do so.)

Still, some deals actually work, bucking the odds and delivering on their promise. HP is trying to make its acquisition of 3Com fall into that category, but, as I pointed out in a post toward the end of last week, the H3C facet of the transaction adds an anomalous international dimension that could prove particularly difficult to manage.

Even putting aside the unique challenges associated with bringing H3C successfully into the fold — and not alienating China in the process — HP has its hands full with the usual integration impediments as it works through its assimilation of 3Com. The latter company’s fiscal year concluded at the end of May, clearing the way for the commencement of full-scale integration efforts in many parts of the world. Whereas HP’s 3Com integration actually had begun in the U.S. in May, HP has started official integration efforts as of today (June 1) in other jurisdictions, including the APAC region (not including H3C’s operations) and the Americas beyond the U.S.

Until now, according to internal HP correspondence, the post-acquisition HP-3Com has constituted a corporate group of companies forced to function as separate entities in specific regions and countries. HP managers, for example, were under strict orders not to manage or direct 3Com employees or to make announcements or organizational decisions affecting 3Com. In the field, too, where sales representatives engage with customers, this interregnum has imposed restrictions on how, and under what conditions, HP and 3Com could approach each other’s accounts.

Even though the fetters are off in many parts of the world — official integration will not happen in EMEA until July 1 — many field and operational questions remain unresolved. A lot effort goes into making an acquisition pay dividends, and much of HP’s success with 3Com will turn on how well it executes the combination of product portfolios and sales efforts.

On the sales side, one interesting dynamic involves the capacity of HP’s ProCruve field representatives to effectively learn about new technologies as well as new products derived from 3Com. While 3Com and HP products overlap in some areas — presenting a different set of problems — 3Com’s portfolio provides a data-center reach that HP did not possess previously. That’s good for HP, of course, but only if it can position those capabilities and features advantageously in customer accounts. This will be a challenge not only for HP field personnel, but for HP marketers, too.

In that regard, HP’s Enterprise Servers, Storage and Networking (ESSN)  unit — to which HP Networking (the former 3Com and ProCurve) belongs — will have considerable work to do at headquarters as well as in the field. It will be interesting to see how much networking expertise HP attempts to poach from its competitors, primarily Cisco and Juniper, and how much residual knowledge it retains in the form of 3Com field staff.