Huawei's Bid To Sell Mobile Unit Stalls

The company cited deteriorating financial market conditions as the reason for dropping the auction this week.

William Gardner

October 9, 2008

2 Min Read
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Huawei Technologies' latest attempt to improve its access in U.S. markets has stalled as the Chinese networking firm called off an auction to sell a major portion of its mobile devices operation.

The company on Wednesday cited deteriorating financial market conditions as the reason for dropping the auction this week.

By selling a major piece of its mobile devices unit to a U.S. partner, Huawei's ability to sell in U.S markets would be greatly enhanced.

There were two reported preliminary bidders, including Bain Capital Partners LLC, which has long been involved in transactions with Huawei and U.S. partner 3Com. The second interested bidder was Silver Lake.

In a statement, Huawei was cautious about its strategy. "While international investors exhibited strong interest in the business, Huawei believes that given current global market conditions and prevailing economic uncertainty the interests of the company are best served by postponing the sale process," the company said, adding that it is "fully committed" to the business and will continue to fund it as needed.

The Huawei mobile devices unit primarily provides handsets, home routers, and PC cards; about one-half of the operation was earmarked for sale in the auction. Media reports said early bids had valued the entire unit at around $4 billion.

Huawei has long had a partnership with 3Com, which markets some Huawei networking products. An attempt earlier this year whereby Huawei and Bain would purchase 3Com failed when U.S. government agencies nixed the deal, reportedly over fears that 3Com's Tipping Point intrusion-prevention systems unit could have been compromised. The deal collapsed even though 3Com had given assurance that Tipping Point would be spun off as an arm's length separate operation.

In announcing the cancellation of the auction Wednesday, Huawei indicated the auction could restart if and when financial conditions improve. The company said it "will continue to monitor market conditions and may in the future resume the sale process."

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