3Com buys Huawei's 49 percent share of their JV for $US882m

Stuart Corner
Wednesday, 29 November 2006 03:50

IT Industry - Deals

3Com is to buy Huawei Technologies' 49 percent stake in Huawei-3Com (H3C) - their joint venture edge switching and router developer founded in 2003 - for $US882 million. The move follows 3Com taking control from Huawei earlier this year with the purchase of two percent for $US28 million.

The buyout figure values the JV at $US1.8 billion, the price 3Com paid for two percent in January valued the company at $US1.4 billion.

When 3Com took control of the JV in February its then president and CEO, Scott Murray,, said: "When the joint venture was formed in 2003, we had three key objectives: first, to establish a substantial presence in China, the world's fastest growing market; second, to create a resource capable of building enterprise-class, cutting-edge switching and routing products faster than we could deliver on our own; and third, to capitalise on a rapidly growing pool of engineering talent. We are extremely pleased with Huawei-3Com's performance, and its potential for continued growth."

At that time, according to industry research firm, IDC's Q3 2005 Asia Pacific LAN tracker, H-3C held a 31 percent share of the Chinese LAN switch market. In the quarter ended 30 September, revenue was $US111 million, an increase of 69 percent over the same period in the prior year. Gross margin for the quarter was 42 percent.

This week's buyout deal was struck through a previously agreed bid process that enabled either party to make cash bids to buy the other party's shares in H3C. 3Com says it initiated the process with a bid on November 15 and its last bid was accepted by Huawei on November 27.

"Thanks to the tireless leadership of H3C's COO, Dr Zheng Shusheng, and his management team, H3C has proven to be a well-established, stand-alone business with substantial market share in China and strong potential to expand globally, and we are very excited at the prospect of owning 100 percent of the venture," said Edgar Masri, president and CEO of 3Com. "H3C is a strategic asset and we believe that 3Com is well positioned to help it expand its global presence.