3Com buys out Huawei stake in H3C

Chinese infrastructure vendor Huawei has accepted an $882 million bid from 3Com to give up its stake in the two companies IP networking and enterprise router joint venture H3C.

Huawei owns a 49% share of the venture and since its foundation in 2003 in Hong Kong has seen the business grow to a 4500-employee company with R&D centers in Bangalore, India; and Beijing, Hangzhou and Shenzhen, China. H3C recorded $324 million in the first two quarters of the year and is projected to reach nearly $1 billion in sales by the end of the year.

3Com extended its first offer to Huawei on Nov. 15, a Huawei statement said, and Huawei accepted the offer on Tuesday. The deal still needs to be approved by Chinese regulators.

“The divestment will further enable Huawei to focus on its core business, strengthen our leadership position in all IP-based FMC … and create long-term value and potential growth for our clients,” Huawei senior vice president Guo Ping said in the statement.

In 2003, Huawei was largely an unknown company outside of Asia, and it used joint ventures with well-established western vendors to bring its products to the global market. Since then, however, Huawei has gained recognition across all of its technology lines internationally, calling into question the need for so many joint ventures. While Huawei may choose to stay in the enterprise router market, it has agreed to a non-compete agreement forbidding it from re-entering the market for 18 months after the deal closes.

Huawei, however, has plenty of other product lines to keep it busy, and it doesn’t appear that it is abandoning the joint venture completely. Over the summer it agreed to a joint venture with Motorola for UMTS, giving it access to Motorola’s GSM sales channels. It also has another joint venture with Siemens focused on the Chinese 3G standard Time Division-Synchronous CDMA (TD-SCDMA).