It looks like earlier fears that the purchase of 3Com by Bain Capital and Chinese firm Huawei might run afoul of U.S. regulators are proving to be correct, but the company is nonetheless putting the best face on its plans to regain some of its lost stature.
Published reports are quoting unnamed intelligence officials as saying the deal might put U.S. national security at risk because it would give Huawei access to 3Com's network security technology used by the Pentagon and other agencies. The Committee on Foreign Investment in the United States (CFIUS), which has the power to block the deal, is said to be reviewing a supposedly critical report from the Office of the Director of National Intelligence.
But the fact that a $3 billion deal might be in jeopardy hasn't stopped 3Com execs from talking up some big plans, particularly for the Asian market. Senior VP Bob Dechant recently told a group of Asia-Pacific partners that the company intends to make a major push in the region, fueled by the R&D capabilities of H3C, the former joint venture with Huawei that 3Com purchased last March. It's interesting to note that 3Com has managed to increase its Chinese market share from practically nil three years ago to nearly 30 percent today, largely due to the H3C venture.
And H3C does seem to be laying the ground work for an extended run at cutting-edge IP networking technology. The group recently linked up with Raza Microelectronics (RMI) of Cupertino, Calif., to incorporate the company's multicore, multithreaded XLR processor into 3Com's SR router. Raza is also expected to become the primary supplier for 3Com's networking, security and wireless lines.
H3C is also relying on Cavium Networks to provide its dual-core Octeon processor for the ER5000 and ER3000 routers aimed at SMBs. The Octeon will also go into the Service Provider media gateway and other devices that emerge under the Open Application Architure (OAA) in the coming year.
Of course, 3Com's future depends solely on what the feds decide to do with the acquisition. If any action is taken at all, it will most likely involve a restructuring to separate sensitive technologies from Huawei. But it wouldn't be unheard of for the government to quash the deal altogether, and relations with China are growing testy again. It would be interesting to know whether 3Com has any backup plans.