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Published on May 23rd, 2011 | by Babar Bhatti


Huawei Fights Back against Political Hurdles

Telecom companies and projects are increasingly becoming political. Huawei – the giant Chinese telecom company  – has been facing tough times while trying to expand globally. Recently Huawei has been blocked by US for a number of strategic projects sales in US.  The matter reached US congress where politicians objected to Huawei citing  national security reasons. Huawei, just like other large tech companies, is also involved in a number of legal battles over Intellectual Property rights.

As noted by many industry sites and journalists, Sprint decided to cut Huawei and ZTE out of the bidding process for its multi-billion-dollar network modernization project after U.S. government officials expressed security concerns.

Huawei Technologies also failed to complete a $2 million deal to buy assets from U.S. startup 3Leaf.  Huawei then decided to fight back by launching a campaign with the goals of better communication and more transparency about the company. Ken Hu, the company’s deputy chairman, to write an open letter to clarify “long-standing and untrue rumors and allegations.”

For the very first time –  Huawei disclosed its directors when it announced annual earning results last month. This caught media’s attention as Ren Zhengfei, the founder and CEO, had never granted an interview with international media.

The earnings rose 30% last year as overseas sales of the Chinese company’s telecommunications hardware and mobile devices grew rapidly despite challenges including a strengthening Chinese currency.

As reported in the media, there was a confidential memo sent to European Union national governments early this year with allegations that ZTE and Huawei benefit from massive credit lines from Chinese state-owned banks and other significant government support. Both Huawei and ZTE have denied receiving subsidies from the Chinese government.

And very recently it won a case against Motorola. Huawei will drop its objections to the sale of Motorola’s network business to Nokia Siemens Networks—a sale it alleged in a lawsuit would transfer its trade secrets to a competitor—in exchange for a one-time fee for use of its technology.

Huawei and ZTE have also filed lawsuits against each other.

More on the recent settlements from Wall Street Journal.

The settlements are a victory for Huawei, which escaped damaging claims and won some recognition for its intellectual property. The fast-growing Chinese telecom-gear maker has previously been targeted with claims it stole trade secrets.

“It’s a clear vindication of Huawei, our brand, our legal claims and our business practices,” Mr. Plummer said.

While the company has won customers in emerging markets and Europe, it continues to struggle with concerns it has ties to the Chinese government and military that have kept it from landing big deals in the U.S. market. Huawei has repeatedly denied such links, but security concerns have stymied its efforts to buy companies with U.S. operations or secure major equipment-supply contracts.

Nokia Siemens, a joint venture between Nokia Corp. and Siemens AG, is buying the Motorola unit in hopes of expanding its own presence in the U.S. market. Huawei had also explored an acquisition of the unit.

Nokia Siemens recently came back to Motorola seeking to renegotiate the terms of the acquisition, which was originally announced in July and was initially expected to close by the end of last year. Motorola and Nokia Siemens agreed to fewer closing conditions, further easing the way to completing the transaction.

The dispute with Huawei stemmed from an agreement dating back to 2001 under which Motorola resold some of the Chinese company’s gear. Huawei claimed that technology and knowledge of its trade secrets would have been transferred to Nokia Siemens when the network equipment unit was sold.

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