* Acquisition expected to close Q1 2012
* Deal value lower than analysts expected
* Hong Kong base lessens regulatory concerns
* JV has lost money since it was created
By Lee Chyen Yee and Sinead Carew
HONG KONG/NEW YORK, Nov 15 Huawei Technologies, the world's No.2 telecoms equipment maker, plans to buy the remaining 49 percent stake in a joint venture with Symantec Corp that it does not already own for $530 million to bolster its corporate security solutions business.
The deal allows Huawei to boost its product portfolio for its enterprise customers and helps Symantec improve its bottomline by dropping the loss-making business, even as the value of the deal fell below market expectations.
The deal is subject to approval from regulators in the United States, but analysts and company executives foresee few hurdles because the joint venture, called Huawei Symantec, was set up in Hong Kong and Huawei already owns the majority stake.
"Whether this deal will complete or not...it is still a question mark for now, but I feel that they have a better chance since this joint venture is established in Hong Kong, outside of mainland China," said Cathy Huang, an analyst at Frost & Sullivan in Singapore.
Huawei expects the deal, which some analysts estimated could have been worth about $1 billion, to close in the first quarter of 2012.
"We likely overestimated Symantec's hand in the negotiation given the joint venture was operated under the control of Huawei," Citi said in a report.
FEW HICCUPS EXPECTED FOR APPROVAL
Shenzhen-based Huawei and smaller crosstown rival, ZTE Corp , have previously encountered obstacles in clinching some deals in the United States due to national security concerns.
For Huawei, the concerns also stem from its founder and CEO Ren Zhengfei, who is a former Chinese military officer.
Earlier this year, Huawei backed away from its acquisition of U.S. server technology company 3Leaf's assets, bowing to pressure from a U.S. government panel that suggested it should divest the assets.
In 2008, Huawei gave up a bid for U.S. networking equipment company 3Com, while in 2010, a group of Republican lawmakers raised national security concerns about Huawei's bid to supply mobile telecommunications equipment to Sprint Nextel Corp.
But this case is different, as the joint venture Huawei Symantec was set up in Hong Kong by Huawei and U.S. security software firm Symantec in 2008.
"The majority of the assets and customers are located in China and other regions. This is not about the U.S.," said Ross Gan, a spokesman from Huawei, said in an email.
Gan said Huawei would brief relevant government stakeholders as part of the routine regulatory approval process for such transactions based on the local laws and regulations that apply.
The aim of the joint venture was to provide and develop network security, storage and systems management solutions to telecom carriers and enterprise customers.
The venture, in which both Huawei and Symantec contributed around $150 million each at that time, has R&D centres in Chinese cities such as Beijing and Shenzhen and in Silicon Valley in the United States, according to the company's web site.
"It's a good thing for Symantec in that it's been a drag to their earnings per share. I'm sure its incrementally positive," said Brian Freed, an analyst at Wunderlich Securities. "There shouldn't be any political or regulatory issues related to this."
The venture has lost money since it was set up in February 2008, according to Symantec's most recent annual report filed with the U.S. Securities and Exchange Commission.
Symantec posted $123 million in losses for its share of the venture's losses from February 2008 to December 2010. The venture, which is expected to continue to be in the red through 2013, was estimated to make a loss of $82 million this year, according to Citi analysts.
Symantec achieved the objectives that it set out for the venture and is leaving with a good return on its investment, Symantec's chief executive, Enrique Salem, said in the statement. The company will continue to invest in China, he added.
Huawei said both companies had talks over the past few months on the future of the venture and decided that it would benefit from a single owner.
Symantec shares rose 2.8 percent to $17.40 in after-hours trading. Huawei is not listed.