3Com teams up with Huawei

What will Cisco do?

Networking suppliers 3Com and Huawei Technologies yesterday announced a joint venture partnership in China to target the country's emerging networking equipment market.

The joint venture, called 3Com-Huawei in English and Huawei-3Com in Chinese, will be based in Hong Kong with principal operations in Hangzhou, China.

Huawei's contribution to the Huawei-3Com will include "enterprise networking business assets, including LAN switches, routers, engineering, sales/marketing resources and personnel, and licenses to its related IP".

3Com brings to the table $160 million in cash, assets related to its operations in China and Japan, and licenses to its related IP.

Bruce Claflin, 3Com president and chief executive officer, said the joint venture delivers high-end extension to its existing telco products. Products from Huawei-3Com offer a "superior price-performance proposition", the companies claim.

No prizes for guessing that the principal competition here is Cisco, whose January lawsuit alleging that Huawei "unlawfully copied and misappropriated Cisco's IOS software... and infringed numerous Cisco patents" adds an intriguing dimension to the story.

On the face of it, 3Com is stepping into a potential legal minefield here. We've due to speak to 3Com executives on this aspect of the deal (which in other respects makes a lot of sense) later this afternoon.

Under the agreement, 3Com will have the right to sell the joint venture's products under the 3Com brand everywhere in the world except China and Japan, where the products will be sold under the Huawei-3Com's brand. In China and Japan, the Huawei-3Com will sell both the former Huawei networking product line, which has been transferred into the joint venture, as well as the existing 3Com product line based on an OEM agreement between the Huawei-3Com and 3Com.

In this way, The joint helps the sale of Huawei's products outside its far East heartland and the sale of 3Com kit in China and Japan.

3Com's Bruce Claflin has been named chairman of the Huawei-3Com 's board of directors while Ren Zhengfei, president and chief executive officer of Huawei, has been appointed chief executive officer. Huawei will own 51 per cent and 3Com will hold a 49 per cent ownership in the joint venture, though 3Com has an option to become 51 per cent majority shareholder in two years.

Over 1,000 Huawei employees are expected to join the joint venture with 3Com expected to contribute 50 employees. ®

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