3Com to be sold to Bain (M. Romney), Huawei (China)

WASHINGTON (MarketWatch) -- 3Com Corp. said Friday it's agreed to sell itself for $2.2 billion to Bain Capital Partners LLC and Huawei Technologies Co., the largest networking company in China.

Boston-based Bain, one of the biggest private-equity firms in the world, would own a majority stake. 3Com Chief Executive Edgar Masri said in a conference call that Bain has great connections in China as well as Europe, markets where the company is seeking to expand. A minority interest in 3Com would be sold to affiliates of Huawei. 3Com previously operated a joint venture with Huawei in China called Huawei-3Com Ltd., but 3Com bought out its partner earlier this year. The venture was started in 2003.

The latest collaboration would give Huawei a bigger foothold in the U.S. and European markets. 3Com makes equipment used to run corporate networks.

Huawei ranks as the largest maker of network-equipment in China. The company's increasingly competing for business with traditional industry leaders such as Cisco Systems Inc. (By stealing their designs !!!), Siemens, and Nortel Networks, not only in Asia but now in western markets.

The rising competition from Asian manufacturers has put further pressure on U.S. and European networkers to reduce costs. It has also become harder to raise product prices and thereby boost profits.

Some U.S. politicians have expressed concern about Chinese companies buying stakes in domestic firms, complaining that the Chinese market is not fully open to Westerners. Yet 3Com is a very small player in the U.S. and Huawei is only obtaining a minority stake.

What's more, big U.S. vendors such as Cisco Systems and Motorola, Inc. already do extensive business in China. Any move by U.S. lawmakers to block Huawei.....

I wonder where "Ren Zhengfei" got all the extra money if he sells his products just pennies above cost?

The CEO of a Chinese firm that gives fits to its competitors and the U.S. government is a former soldier who fashions himself after Chairman Mao. Like China's former leader, Ren Zhengfei is known for spouting folk witticisms, purging associates and challenging U.S. power. The firm he co-founded, telecom-equipment maker Huawei Technologies, supplied Baghdad with an "illicit" communications system in 2000, according to the CIA, and has been accused by Cisco of stealing designs for routers. Yet Ren, 61, has proved his entrepreneurial skill, building Huawei into a low-cost alternative to big-name firms like Cisco and Ericsson. Last year Huawei signed more than $2 billion in foreign contracts, a figure Ren hopes to double this year. Ren founded Huawei in 1988, and it became a top builder of the Chinese army's communication networks. Huawei today makes third-generation mobile-phone networks, routers, switches—whatever moves data. The company has spent liberally on a sprawling campus in southern China, and its cut-rate prices mean profit margins are thin. Because its ledgers are secret, analysts can only wonder if Huawei is headed for a financial crisis.

Because its ledgers are secret, analysts can only wonder if Huawei is headed for a financial crisis.

Huawei is bankrolled by the Chinese government. It will go under the day the Chinese government goes under. That is to say - we could be waiting a while. Having used its consumer-level stuff, I can truly say that it is junk.

Huawei is not allowed to sell most/all of its products in the USA because they have ripped off the software from Cisco, and Cisco blocked them.

By buying 3Com they gain plausible deniability that the routers are Cisco knockoffs.

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