Huawei’s 3Com deal flops (China)

This isn’t exactly a shocker: Huawei has suffered a major setback* in its bid to buy a stake in 3Com. The Chinese telecom-equipment company has been trying for months to be the junior partner in a deal led by Bain Capital to take over 3Com in a proposed $2.2 billion deal.

It didn’t take long for opposition to the deal to build in the U.S., though, as lawmakers in Washington griped about the security implications of a Chinese company allegedly tied to the People’s Liberation Army (a charge that Huawei has consistently denied) gaining access to a second-tier American company,and now the companies are withdrawing their application to the Committee on Foreign Investment in the U.S.

No doubt many Chinese will see this setback for Huawei as another sign of a protectionist, anti-China agenda in the U.S. But hold the indignation for a moment. Huawei has largely itself to blame for this flop. One reason people worry about Huawei is because its founder and CEO, Ren Zhengfei, is a former PLA officer. But rather than allay concerns that he’s somehow still connected to the military, Ren has stayed in the background. While Huawei often makes other executives available for interviews, that openness ends with the CEO.When the boss won’t talk, that doesn’t exactly inspire confidence among people already inclined to distrust the company.

Compare Huawei’s case with that of another Chinese tech company that made a big move in the U.S.: Lenovo. China’s top computer maker bought the PC division of IBM in 2005, and while some people grumbled about security implications, the deal went through. In part, that’s was because Lenovo is a public company and isn’t as mysterious as the privately-held Huawei. And Lenovo’s top executives especially chairman Yang Yuanqing are not at all shy about speaking to reporters and telling their story. That reassured would-be skeptics that the company had nothing to hide.

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