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Originally Published By Steven Burke on March 26, 2015 on crm.com

Hewlett-Packard is close to selling the majority stake in its H3C Technologies Co. networking business to Tsinghua Unigroup, Ltd., according to the Wall Street Journal.

The Journal is reporting that Tsinghua Unigroup “has emerged as the preferred bidder in an auction of 51 percent” of the H3C business. The deal could also include a separate deal for a server business in China, the report said.

HP would not comment on the report.H3C, which has a market value of about $5 billion, was established through a joint venture between Chinese networking giant Huawei Technologies and networking equipment maker 3Com, which HP acquired in 2010 for $2.7 billion.

HP, like other U.S.-based companies, has found it difficult to compete for business against Chinese based IT vendors. Just six months ago, chip giant Intel invested $1.5 billion to obtain a minority 20 percent stake in a semiconductor business with Tsinghua Unigroup.

[highlight type=”one”]”For HP to grow its business in China, it’s the right decision,” said Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based HP partner. “If you look at companies trying to scale and grow in China, you need Chinese ownership. It is disappointing that American companies have to divest in a situation like this, especially with all of the income China derives from manufacturing U.S.-based products.”[/highlight]

In the most recent quarter, HP’s networking business was down 11 percent. As a result of the sales fall-off, HP CEO Meg Whitman told analysts on the quarterly earnings call that HP had made leadership changes in China and also was in the process of realigning sales incentives.