3Com takes control of H3C, buys Huawei stake

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By  Published  December 8, 2006

Networking vendor 3Com has bought out Huawei’s stake in the companies’ joint venture Huawei-3Com, known as H3C, for US$882million.

The move gives 3Com total control of the joint venture, which was set up by the two companies three years ago.

Huawei accepted 3Com’s offer for its 49% stake on November 27, shortly after 3Com initiated the bid process earlier that month.

In a statement, Edgar Masri, president and CEO of 3Com, said the firm was “very excited at the prospect of owning 100% of the venture”.

“H3C is a strategic asset and we believe that 3Com is well positioned to help it expand its global presence,” Masri added.

The move was questioned, however, by the market — shares in 3Com dropped 9.6% on Nasdaq on November 29 upon the news — with some analysts viewing it as an attempt by 3Com to offset weakness in its legacy networking business.

“Given the continued struggles of 3Com’s legacy networking segment, we believe the joint venture, which sells into the attractive Chinese market, has become crucial to 3Com’s growth profile,” Ari Bensinger, analyst for Standard & Poor, said in a research note.

For its part, Huawei stated that offloading its stake in the partnership would allow it to
focus on its core business and strengthen its position in the internet protocol (IP)-based FMC (fixed and mobile convergence) solutions market.

“Over the past three years, 3Com and Huawei have contributed a great deal to the development of H3,” said Guo Ping, senior vice president of Huawei. “H3C has become one of the leading global suppliers of IP networking products and solutions, and we wish them every success in the future.”

The Chinese equipment maker said that it would continue to comply with its commitments under the existing joint venture agreements.

Formed in November 2003 and headquartered in Hong Kong, H3C employs 4,800 people worldwide, over half of which are engaged in research and development (R&D).

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