With multibillion dollar mega-deals like Sprint
With 3Com's market cap at roughly $1.5 billion, this deal looks close to a bet-the-house transaction.
TippingPoint's stock has been surging since the summer -- going from $20 to $46. Then again, the company is a leader in a hot space: network-based intrusion prevention systems. Security is a must-have for the enterprise market, and TippingPoint's solutions are in high demand.
3Com's stock price, on the other hand, has been in free fall this year. Its 52-week high is $9.34; the stock, now under $4.00, is near a 52-week low.
3Com develops networking hardware, such as switches and routers. Its industry is fiercely competitive, with strong players like Cisco
No doubt, 3Com needs to find a strategy to ramp up growth. While TippingPoint's revenues will be roughly $6 million for 2004, the company is a swimmer in what is probably still an early, high-growth time for IP security -- a very good thing. And what does TippingPoint get? Basically, it can accelerate growth with the benefit of 3Com's backbone and infrastructure.
But Cisco and Juniper have recently cinched deals to boost security for their networking products. So, in a way, the 3Com deal looks reactive. Worst of all, it will come at a reasonably high price tag (it's an all-cash deal) and probably will not pave the short-term path to profitability that Wall Street definitely wants to see.
Fool contributor Tom Taulli does not own shares mentioned in this article.
