HP seeks sale of Chinese networking business

Hewlett-Packard is attempting to sell its Chinese networking arm to a local buyer.

Credit: Hewlett-Packard

Hewlett-Packard has begun talks with private equity firms in order to sell its enterprise networking business to a Chinese buyer.

According to the Wall Street Journal, rising tension between the United States and China is affecting businesses in both countries, as well as the ability of companies to operate and compete in each others' markets. As a result, the technology giant is seeking a local buyer to take on its Chinese networking unit — since problems between the US and China are now hurting business prospects.

Citing people familiar with the matter, the publication says discussions with private equity firms are first on HP's list in the bid to sell the H3C Technologies business. The sale of the corporate networking unit is in a very early stage, and the PC maker may only sell a controlling stake — 51 percent — assuming a deal is reached at all.

H3C Technologies supplies networking gear including routers, Ethernet switches, wireless LAN, security and network management systems to Chinese clients. According to the company's website, H3C accounts for over 5,000 employees worldwide.

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Sale of HP's business could be worth up to $5 billion, according to the WSJ's sources. However, if the Chinese government is to approve the deal, a buyer is likely to have to be local. In addition, a potential sale is not limited only to private equity firms, as a Chinese technology company may also show interest in taking on HP's corporate networking business.

The relationship between the United States and China has worsened in the past several years, as both countries have continually accused the other of spying and cyberattacks. The US has been accused of a range of spying activities — from the operation of the US National Security Agency (NSA) to a report released by US officials which suggested Chinese networking firm Huawei may be used as a conduit for the Chinese government to spy on other countries.

In turn, the US believes China is sponsoring hackers to attack the country, and FBI chief James Comey recently compared Chinese hackers to " drunk burglars ."

US companies including Microsoft and IBM are weathering the political storm — but business has been better in the Asian countries. The Chinese government recently banned the use of Microsoft's Windows 8 operating system on government computers, and financial institutions are also being urged to discard high-end IBM servers in favor of local alternatives.

Read on: In the enterprise