Up to Bat Again - Will it be Strike Two for Huawei in the United States?
Top Chinese telecom equipment manufacturer Huawei Technologies is at it again. Back in 2008 Huawei made an attempt to participate with Bain Capital’s proposed acquisition of 3Com Corporation. The deal didn’t go through. There was much speculation that the Committee on Foreign Investment in the United States (CFIUS) determination that Huawei had ties to China’s People's Liberation Army and posed a threat on national security grounds. The failed transaction is discussed in more detail in a past December 2009 blog posting.
Huawei’s latest endeavor, despite continuing U.S. security concerns, is its reported bid for a unit of Motorola, the U.S. mobile phone manufacturer. Earlier this year, Motorola announced a plan to split into two separately traded companies, one for mobile and home business and the other focusing on enterprise mobility and networks business. In March, Motorola Co-CEO Greg Brown paved the way for a sale or merger of its mobile network business unit.
Huawei is considered the most probable potential buyer and intends to expand its sales in the North American market.
Since Huawei has lost major deals in the past because of political and security fears, the company is considering negotiating a "mitigation agreement" with CFIUS to show its willingness to cooperate with the United States government.
When asked about its motivation to enter such an agreement, Charlie Chen, senior vice-president of marketing at Huawei, responded to questions by the Financial Times, "We are aware that some in the U.S. government have expressed concerns about Huawei and we will work diligently to address those concerns."
If Huawei does manage to receive approval from the U.S. government, the Huawei-Motorola deal could create a new powerhouse and increase competition among the other major mobile network equipment manufacturers: Nokia-Siemens, Cisco, Alcatel-Lucent and Ericsson. It is uncertain whether or not Huawei’s bid will be successful, but it all may not be lost for Huawei in the United States.
