HP Acquires Colubris Networks; China Unicom Increases Spending on 3G

Officials from Hewlett-Packard Corp. (HP) recently announced that they intend to acquire Colubris Networks. In other news, China Unicom LTD. announced plans to spend over $13 billion to build out a third generation (3G) wireless network, while Vonage Marketing, Inc. posted $228 million in revenue for its most recent quarter.

Focal Points:

• Officials from HP announced that they were planning on acquiring Colubris Networks. HP officials said they plan on using Colubris Network's portfolio of management, networking security capabilities to help it compete against Cisco Systems, Inc. Colubris Networks will be added to the ProCurve Networking portfolio. HP officials said they plan on targeting vertical markets, such as healthcare, hospitality, and manufacturing. HP officials said that they plan on closing the Colubris acquisition by the end of October 2008. One of the reasons HP chose Colubris was its experience in working with the emerging 802.11n wireless networking technology.
• Officers at China Unicom said that they intend to spend up to $14.6 billion on building out a wireless 3G networking across china. The money will be spent over the next two years. China Unicom officials said they plan on leveraging the 3G spectrum license that they will acquire as part of its merger with China Netcom Group Ltd. China Unicom and China Netcom are merging as a result of industry restructuring that has been driven by Chinese government regulators. The Chinese government will issues three nationwide 3G licenses. The recipients of these licenses are expected to be China Mobile Ltd., China Telecom Corporation Ltd. and China Netcom.
• Officials from Vonage recently announced that the company had posted $228 million in revenues for second quarter for 2008. This is the largest revenue to date posted by Vonage. However, the company is still operating at a loss, with the most recent quarter's loss at $7 million. This is down of last year's second quarter loss of $23 million. Vonage's average revenue per line increased from $28.85 to $29.04. Vonage officials said they added 2,000 customers for the quarter, with industry high churn rates of around three percent. Marketing and advertising expenses account for 29 percent of total spending.

Experton Group believes wireless services in China will continue to grow far ahead of the rest of the world's growth, due to strong government support and tight control over long-term strategic planning. HP's acquisition will round out its networking portfolio, but will not likely make a strong dent in Cisco's massive enterprise dominance in networking. Vonage is likely to flounder, as very slow growth in the commercial space and little business adoption will team to hamper its progress. IT executives should look at IP telephony services as a backup communication alternative, but Experton Group recommends against using these services as a mainstay to corporate communications.