Chinese Telecom equipment maker Huawei Technologies has no
intention of abandoning its acquisition of US network technology
company 3Com Corp despite rising protectionist sentiments in the
United States, a company source said.
Huawei and its partner, US private equity firm Bain Capital LLC,
have withdrawn an application for the acquisition from the
Committee on Foreign Investment in the United States (CFIUS), a US
government panel that reviews the "national security" implications
of foreign deals.
That could make Huawei another victim of the rising US
protectionism against Chinese companies' acquisition activities in
the United States, after China National Offshore Oil Company Ltd,
whose attempt to acquire Unocal Corp was nixed by US
politicians.
Yet, Huawei will seek other ways to push the acquisition bid
forward, the source said, without elaborating.
"The deal is a normal commercial investment for Huawei," China's
foreign ministry spokesman Liu Jianchao said yesterday. "We hope
the relevant US agencies will treat this matter in a fair and just
manner and create an equal and reasonable investment environment
for Chinese companies."
Huawei and Bain clinched a $2.2 billion deal with 3Com in
September. Industry insiders say Huawei initially wanted to go it
alone in the acquisition, but later invited Bain to dilute its
stake to ease political concern.
Under the deal, Huawei would take a 16.5 percent stake and
promise not to exert management control. Besides, a unit of 3Com,
which sells security software to the US government - the focus of
US politicians' concerns - would be divested by Bain.
The Huawei source said the security fears about the acquisition
are being hyped by the looming US presidential election.
"The US is almost the last market where we have been unable to
build a significant presence (due to protectionism)," he said.
Huawei last year reported $16 billion in contract sales, with 72
percent from overseas. It has been selling products in more than
100 countries, but its US expansion has been bumpy.
San Jose-based Cisco Systems, which competes with 3Com, launched
a lawsuit in January 2003 against Huawei accusing it of infringing
upon its patents in routers, which direct the Internet traffic.
In 2004, Cisco dropped the lawsuit, but it put a brake on
Huawei's expansion in the US, where Huawei had been undercutting
Cisco with products about 30 percent cheaper.
US politicians and some sections of the media have labeled
Huawei as a company associated with the Chinese military just on
the ground that company founder Ren Zhengfei was a retired
armyman.
Although Huawei has posed a serious threat worldwide to
established Western rivals such as Ericsson, Nokia Siemens Networks
and Nortel Networks, it has yet to get a jump-start in the US.
"We have had great difficulties in securing contracts from US
operators although we outperformed our rivals in technology tests,"
the Huawei source said.
Huawei's contracts in the US are mainly from small local
operators such as Leap Wireless though it has been gaining
increasing favor of global operators such as Vodafone and British
Telecom.
(China Daily February 22, 2008)
