Report: HP Looking to Offload China Networking Business
Hewlett-Packard (HPQ), fresh off a move to split the company by PC/printers and enterprise solutions, is huddling with private equity firms in China to sell off controlling interest in its local corporate networking business, according to a Wall Street Journal report.
Hewlett-Packard (HPQ), fresh off a move to split the company by PC/printers and enterprise solutions, is huddling with private equity firms in China to sell off controlling interest in its local corporate networking business, according to a Wall Street Journal report.
HP is looking to sell at least 51 percent of its Hangzhou-based H3C Technologies, in a deal that could be valued at up to $5 billion, the report said. HP gained control of the H3C when it bought 3Com for $2.7 billion in 2010, an acquisition that substantially expanded its Ethernet switching offerings, added routing solutions and strengthened its position in China.
With HP among a number of IT heavyweights, including Cisco Systems (CSCO), Google (GOOG), IBM (IBM), Microsoft (MSFT) and Qualcomm (QCOM) coming under closer scrutiny by the Chinese government, any deal for H3C likely will have to be made with a local buyer to win approval, the report said.
While a Chinese technology company could emerge as a buyer, the most likely scenario is for H3C to be sold to a private equity group, according to the Journal’s account. Whether a deal involves Chinese private equity money or a local IT buyer, HP is said to want to retain a significant minority interest in H3C to continue to use its low-cost manufacturing.
The H3C business sells a wide range of enterprise networking equipment in China, including routers, software and switches. HP doesn’t break out sales and profit for the unit, which employs some 5,000 people. The business dates to 2003 as a joint venture between Huawei and 3Com, with the latter company subsequently buying out the Chinese telecom’s interest in 2006.
When HP announced its plan to split the company into two publicly held entities—one operation for PC and printers and another for enterprise business—HP boss Meg Whitman indicated the enterprise unit could grow through acquisitions. Selling off its H3C unit could help generate the cash to make additional M&A moves.
The company noted, in the separation’s aftermath, that it possessed material non-public information related to a possible acquisition. With any and all talk of an EMC deal gone out the window, might the H3C selloff be the forerunner to another deal in the works?
