Speculation is rife that China's technology giant, Huawei Technologies, will buy struggling British telecommunications equipment and services company, Marconi Corp Plc.
Such an acquisition, if completed, together with Lenovo and TCL's high-profile overseas binge in the past few months, underlines the growing desire of Chinese technology firms to buy their way into the world's big leagues.
British media said the deal, if there is one, would be worth about US$1 billion.
Huawei has denied the rumors. But Marconi on Monday acknowledged it is in talks with third parties for "potential business combinations," which put Huawei under the spotlight as a possible contender.
"The discussions are at a preliminary stage and there can be no assurance that an offer will ultimately take place," Marconi said in a statement.
Yesterday Huawei's spokesperson Fu Jun would not comment on the speculation.
Just a few days ago Fu told China Daily that Huawei was not interested in a takeover deal with Marconi as Huawei is not a public firm and does not have a lot of spare cash at hand.
There were also rumors that Huawei would buy German giant Siemens' mobile phone unit. Taiwan's BenQ finally landed the deal.
Chris Han, a senior analyst with Norson Telecon Consulting, said the possibility of a Huawei-Marconi merger is high.
Under a memorandum of understanding signed in January, Huawei and Marconi agreed to distribute each other's products to key customers.
This distribution partnership could have paved the way for a takeover deal, Han said.
Han said Huawei will not pay a high price for a takeover as Marconi has been struggling for a long time and its shares have hit a record low.
"Huawei has long been focusing on developing countries and taking over Marconi would give it faster access to the European and US markets," Han said.
Buying Marconi could help Huawei be even more competitive, giving it the extra edge to challenge giants like Cisco Systems.
Huawei has singled out Europe as the major growth market overseas with an ambitious target to triple its annual sales there this year.
In 2004, it recorded US$200 million in contract sales in Europe. Its annual overseas sales hit US$2.28 billion.
Huawei's overseas sales in the first half of this year stood at US$2.47 billion.
Some analysts speculate that behind the rumored takeover are Huawei's efforts to seek a backdoor listing via Marconi.
The Chinese firm has been seeking overseas listing but its efforts have been thwarted by its complicated ownership structure. It is reportedly 100 percent owned by its employees.
Marconi is listed on the London Stock Exchange and NASDAQ.
Wang Guoping, an analyst with China Galaxy Securities, said Hong Kong might be the best place for Huawei to get listed as the city is near its headquarters in Shenzhen.
"I think Huawei will be able to eventually get listed in New York even without Marconi (as long as it settles its ownership structure)," Wang said.
"It's unnecessary for Huawei to buy Marconi to facilitate its overseas listings," Wang added.
(China Daily August 10, 2005)
