Feeds

Latest China scare torpedos 3Com takeover

I trump your China card with my national security fears

Boost IT visibility and business value

3Com's proposed takeover by a US private equity firm and a Chinese rival lay in tatters today, with the three companies admitting defeat in their attempts to mollify US government national security concerns.

3Com stock plunged 20 per cent today on news that the company, along with wannabe owners Bain Capital and networking equipment maker Huawei Technologies, today withdrew their application to the Committee on Foreign Investments in the United States (CFIUS). This division of the US Treasury can block deals if "it believes the nation's security would be placed at risk", CNNMoney reports. So, no application means no deal.

The proposed takeover was an immediate cause for concern with US feds when Bain offered to buy 3Com for $2.2bn cash in September 2007. Under the original terms, Huawei would secure a 16.5 per cent stake in 3Com, while Bain took the rest.

Officials are uneasy about a Chinese manufacturer being granted access to 3Com's TippingPoint unit, which sells intrusion prevention technology to the US government. Critics of the deal also point out that Huawei's founder, Ren Zhengfei, is a former Chinese army officer.

Earlier this month, Xu Zhijun, chief marketing officer at Huawai, told the Financial Times that concerns over the deal are "bullshit."

Since then, Huawei has put back on its corporate game face.

“We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction,” said Edgar Masri, CEO of 3Com in a statement.

The 3Com takeover appeared to be back on track last week with an supposed offer to spin-off TippingPoint instead. But the negotiations have clearly not satisfied US feds.

Huawei and Bain said they are committed to continuing discussions, but it is difficult to see a way forward with this deal. ®

The essential guide to IT transformation

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Microsoft: Azure isn't ready for biz-critical apps … yet
Microsoft will move its own IT to the cloud to avoid $200m server bill
Oracle reveals 32-core, 10 BEEELLION-transistor SPARC M7
New chip scales to 1024 cores, 8192 threads 64 TB RAM, at speeds over 3.6GHz
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
Flash could be CHEAPER than SAS DISK? Come off it, NetApp
Stats analysis reckons we'll hit that point in just three years
Object storage bods Exablox: RAID is dead, baby. RAID is dead
Bring your own disks to its object appliances
Nimble's latest mutants GORGE themselves on unlucky forerunners
Crossing Sandy Bridges without stopping for breath
prev story

Whitepapers

5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.