Mao to run 3Com from China

Networking equipment firm 3Com has ousted chief exec Edgar Masri in the wake of an abandoned buyout by Bain Capital Partners and Huawei, the Chinese networking firm.

Masri was replaced by Robert Mao, 64, a fluent Mandarin speaker who will be based in Beijing, which the US-based firm views as its biggest potential market. New president and chief operating officer Ronald Sege, the former chief exec of wireless networking firm Tropos Networks, will be based in the US and will handle the firm's business outside China, reporting to Mao.

Eric Benhamou remains 3Com's chairman following Tuesday's shake-up - which is perhaps just as well since the idea of installing chairman Mao at the head of a major publicly traded firm is unlikely to go down well in the US.

Basing its chief on the other side of the world is a radical, not to say ballsy, move by 3Com - a firm that's had sand kicked in its face by market leader Cisco for years after pioneering Ethernet and network computing.

Perhaps the Committee on Foreign Investment in the United States (CFIUS) had an inkling that Mao was on the ascendancy when it held out on a proposed $2.2bn buyout of 3Com by Bain and its Chinese partner. The two firms pulled out of the deal in March after failing to restructure the agreement to the satisfaction of the CIFUS.

The Treasury committee expressed national security concerns about Huawei gaining a minority stake in 3Com, whose TippingPoint unit sells intrusion prevention kit to the US government. Concerns were further inflamed by Huawei founder Ren Zhengfei's background as a former Chinese army officer. Under the original terms of the deal, Huawei would secure a 16.5 per cent stake in 3Com, while Bain retained the rest.

Huawei dismissed these concerns as "bullshit", pointing out that no objections were raised when 3Com and Huawei got into bed in a 50-50 joint venture.

The 3Com deal is not the first to involve the information security market getting into trouble over national security concerns. Israel-based Check Point dropped its $225m planned purchase of intrusion prevention firm Sourcefire in March 2006 after objections from the FBI and Pentagon were heard by the Treasury's Committee on Foreign Investments. ®