Hewlett-Packard Co (HP) is selling a controlling stake in its China server and storage unit, a move that comes as the Chinese government, apparently worried about US cyberspying, has encouraged the use of local companies.
HP said on Thursday it would sell the 51 percent stake in the business for about US$2.3 billion to Tsinghua Holdings Co (清華控股), part of state-owned Tsinghua University. The sale is planned to create a partnership to be called H3C Technologies Co (華三通信技術).
HP said the move would accelerate growth in the country.
“HP is making a bold move to win in today’s China,” HP CEO Meg Whitman said. “Partnering with Tsinghua, one of China’s most respected institutions, the new H3C will be able to drive even greater innovation for China, in China.”
Analysts have noted that the Chinese government has been increasingly restrictive about international tech companies amid growing concerns that the US has been spying on China remotely.
Although no official restrictions have been confirmed, some big companies in China have stopped using tech services from US companies like Symantec Corp and IBM Corp over the past few years.
Cantor Fitzgerald analyst Brian White said in a note to clients that the partnership is a positive step for HP “in light of the growing backlash against US IT companies selling into China that has further accelerated sharply in recent months.”
HP is to maintain ownership of its other businesses in China, including business services, software, HP Helion Cloud and other operations.
“We believe the deal [with Tsinghua] will help HP become more competitive in the China market given the recent Chinese government preference to purchase technology from local vendors,” Wells Fargo analyst Maynard Um said in a research note.
Gartner Inc analyst Neil MacDonald said the tension goes both ways, with the US House Intelligence Committee issuing a report in 2012 alleging Chinese telecom equipment makers Huawei Technologies Co (華為) and ZTE Corp (中興) are potential security threats that the US should avoid doing business with.
“We’ve seen the increased fracturing of IT along geopolitical lines [in general],” he said. “This is one way to address the ownership concerns.”
H3C would have about 8,000 employees and US$3.1 billion in annual revenue. HP said the change would allow it to better serve customers in China.
HP is undergoing a broader restructuring as it prepares to split into two companies by Oct. 31.
The deal with Tsinghau Holdings is expected to close by the end of the year.
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