3Com Takes TippingPoint

3Com Corp. (Nasdaq: COMS) has stumped up $430 million in cash for intrusion and prevention specialist TippingPoint Technologies Inc. (Nasdaq: TPTI) in an attempt to boost its security story (see 3Com Acquires TippingPoint).

3Com is offering $47 per share -- roughly $430 million based on Friday's closing price -- for the Austin, Texas-based company. That would be a 13 percent premium, 3Com executives noted. Understandably, TippingPoint's share price was up $4.89 (12%) to $46.55 late today; 3Com, meanwhile, had dropped 34 cents (8%) to $4.10.

The deal is expected to close in the third quarter of 3Coms 2005 financial year. TippingPoint would eventually operate as a division of 3Com, with TippingPoint CEO Kip McClanahan as division president. McClanahan would report to 3Com CEO Bruce Claflin.

The deal isn't all that surprising. Merger and acquisition activity in the telecom equipment market is starting to pick up, as identified in October’s Light Reading Insider report, "M&A: Consolidation Craze." Increasingly, the major vendors are focused on deals with the long-term potential to help carriers reshape networks for delivery of packet-based, converged services.

TippingPoint’s flagship product is the UnityOne intrusion and prevention device, which came onto the market last year, and the company has already established a reputation as a front-runner in VOIP security (see VOIP Security Poses a Problem and Vendor Points to VOIP Vulnerabilities).The emergence of VOIP is posing a major headache for telecom firms. As opposed to traditional telecom networks, which use circuit switches to transfer calls, IP-based VOIP networks rely heavily on enterprise data gear. Running VOIP across routing and switching equipment means that ports are often left open to allow the passage of VOIP traffic, potentially exposing backend data center servers to security threats such as viruses and denial-of-service attacks.

That's created a boost in business for TippingPoint, with third-quarter revenues of $9.7 million representing a 370 percent increase from the same period last year. Recent deals have included a contract with Korean heavyweight KT Corp. (see TippingPoint Q3 Revenues Soar and Korea Telecom Deploys TippingPoint).

More recently, TippingPoint has switched its focus onto spyware, software that collects personal information without the computer user's knowledge or permission (see TippingPoint Blocks Spyware and Spyware Blitz Spawns New Market).

3Com, meanwhile, has kept VOIP a top priority, as the company has announced plans to open a new design center in Hyderabad, India, to support its VOIP networking products (see 3Com Opens India Design Center).

— James Rogers, Site Editor, Next-Gen Data Center Forum0