Tags: hp | china | Tsinghua | beijing

HP's $4.5 Billion Chinese Business Finds a Local Face to Succeed

Friday, 22 May 2015 05:57 AM

Hewlett-Packard Co. acknowledged its Chinese unit’s “disappointing” performance twice this year, following new restrictions on foreign technology vendors. Now it has given up control of the $4.5 billion business to try to change its fortunes.

Hewlett-Packard said Thursday it will sell 51 percent of its networking and server operations in the country to an arm of Beijing’s elite Tsinghua University, the alma mater of Chinese President Xi Jinping. It’s betting that ceding ownership to the state-owned Chinese firm will help it boost sales as the government presses the country’s banks, military and major enterprises to stop buying most foreign technology.

The deal highlights what’s necessary to succeed in the world’s No. 2 economy as the Chinese government promotes home- grown technology at the expense of companies like Cisco Systems Inc. and International Business Machines Corp. Tsinghua beat rival bidders through its advantages as a state-owned company and ready access to capital, according to Zhao Weiguo, its investment arm’s billionaire chairman.

“We do have our secrets, but all of them are legal,” Zhao told reporters in Beijing on Friday. “I don’t want to talk about products, technology and so on, because when you’re dealing with M&A, other factors are more important.”

NSA Hacking

His firm beat state-owned China Huaxin Post & Telecommunication Economy Development Center for the holding in the Hewlett-Packard business, even though Huaxin had won pre- approval for the deal from the country’s top economic planning agency, according to people familiar with the matter. They asked not to be identified discussing private information.

The government typically gives only one company the go- ahead to pursue a deal, in order to avoid Chinese firms competing and driving up the price. The economic planning agency, called the National Development and Reform Commission, didn’t immediately respond to a faxed request for comment. A Beijing-based press officer for Huaxin confirmed the company received NDRC approval for its bid.

China is moving to bolster its technology sector after Edward Snowden revealed widespread spying by the U.S. National Security Agency and accused the intelligence service of hacking into the computers of Tsinghua University. President Xi called for faster development of the domestic technology industry at the first meeting of his newly created Internet security panel in February last year.

“If the choice comes down to choosing a domestic vendor or a Western company, there’s definitely a preference for the domestics,” Stephen Yang, an analyst at brokerage Sun Hung Kai Financial Ltd. in Hong Kong, said by phone Friday. “The control has shifted to Tsinghua, but it’s safe to say that HP is still driving the strategy of that business.”

Management Rights

Hewlett-Packard will help appoint management for the Chinese venture, which is known as H3C, and Tsinghua won’t make major changes to its operations, Tsinghua Unisplendour Corp. President Qi Lian said Friday in Beijing. The U.S. company will retain rights to H3C’s intellectual property and is keeping full ownership of its China-based enterprise services, software, HP Helion Cloud, Aruba Networks, printing and personal-systems businesses, which aren’t part of this deal.

Tsinghua is broadening the scope of its dealmaking after spending about $2.1 billion to acquire semiconductor companies since 2013, according to data compiled by Bloomberg. It beat an arm of the Shanghai government to acquire chip designer RDA Microelectronics Inc. in an $893 million deal completed last year, the data show.

Credit Suisse Group AG advised Hewlett-Packard on the sale.

© Copyright 2019 Bloomberg News. All rights reserved.

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Hewlett-Packard Co. acknowledged its Chinese unit's "disappointing" performance twice this year, following new restrictions on foreign technology vendors.
hp, china, Tsinghua, beijing
Friday, 22 May 2015 05:57 AM
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