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Huawei’s ambitions stifled by US security concerns

Huawei were reportedly outbid by Nokia Siemens Networks for the acquisition of Motorola’s networks business, but this may not be the true reason for the Chinese vendor’s failure to procure the US-based business.

In the last month, Huawei lost out on deals to acquire both Motorola’s networks business and the software supplier 2Wire (which was acquired by Pace). Sources are now claiming that in both auctions the Chinese vendor’s bids were at least US$100 million more than the winners.

Although Huawei is being advised by a selection of well-respected law firms, its attempts to break into the US market – such as its bids for the aforementioned assets – have been stymied by US concerns that it represents a security threat.

“There is still some scepticism in the US about any potential sale of technology assets to a Chinese company,” said Wilson Chai, an analyst at Mirae Asset Securities in Hong Kong. “After years of trying in the US, Huawei hasn’t made any significant breakthroughs in that market.”

There are indications that Huawei is determined to enter the American market, with reports suggesting that the company is considering significant steps towards proving its transparency – including a management overhaul, going public on the US or Hong Kong stock exchange, or the creation of a US-based company that would not be controlled by the Chinese firm. Huawei’s attempted acquisition of 2Wire reportedly fell through as the transaction would have been slowed by the US government review process.

However, the Motorola deal may simply have been a case of being outmanoeuvred by an opponent, with Bloomberg reporting that NSN clinched the deal by allowing Motorola to retain US$150 million in accounts receivable, cash and assets. In addition, the majority of the unit’s patents were retained by Motorola. NSN will go ahead with the deal to purchase Motorola’s networks business for US$1.2 billion.

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