* 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
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
"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
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
"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
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
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.