A joint venture between 3Com and Huawei Technologies has received approval from the Chinese government and began operations this week.
Huawei-3Com will sell enterprise-class routers and Ethernet LAN switches in China and Japan, and 3Com has rights to market the same Huawei- 3Com products in all other countries. The green light for the joint venture by the Chinese government follows approval by the US and UK in July.
The two companies announced their plans for the joint venture in March.
Huawei, based in Shenzhen, China, is contributing its enterprise networking business assets to Huawei-3Com, including LAN switches and routers, engineering and sales/marketing resources and personnel, and licenses to its related intellectual property, according to 3Com.
3Com is contributing $US160 million in cash, assets related to its operations in China and Japan, and licenses to some intellectual property. In two years, 3Com has the right to acquire a majority ownership interest in Huawei-3Com.
Principal operations for the joint venture are in Hangzhou, China.
Huawei is still subject to a law suit in the US, which was brought by Cisco Systems and pertains to a dispute over source code in Huawei’s Versatile Routing Platform (VRP) software.
Huawei claims it removed the disputed code prior to the court ruling ordered its removal.
Under an agreement between Cisco and Huawei reached last month, the litigation has been stayed, pending an independent review of changes ordered by the US court. Both parties agreed on the terms of the review.
3Com president, Stanimira Koleva, said it was expected that the review could take about six months.
In the meantime, 3Com was throwing its weight behind Huawei, satisfied that its partner hadn’t done anything wrong, Koleva said.
Huawei’s source code was demonstrably its own, she said.
“We did our due diligence,” Koleva said. “As a vendor we can’t afford to take any risks.”
The products developed with Huawei would be fully standards-based, she said.
“We will not be supporting any proprietry technology,” Koleva said.
3Com’s increased reliance on hardware partners such as Huawei to broaden its product portfolio was a response to the tightening of the market,she said.
“Most of the IT hardware vendors faced similar factors,” Koleva said. “In a business which is R&D costly, when your market is transitioning from growing exponentially to - suddenly after 2000 - a more normal market, you have to reassess the financial situation to become compliant with the new economic reality.”
“We had two challenges – to scale up our product portfolio, to become a scalable one-stop shop for enterprise, and dealing with price erosion. Our business is getting commoditised much more quickly.”
Koleva was last week interviewing candidates to head up the newly-restructured enterprise sales and channel/education sales managers for Australia.
They will report directly to her, replacing the managing director role which was vacated by Mike Clarke in the restructure in early October.