I met Mike Rothman last night for drinks. He was on a once in a lifetime pass through Southfield, Michigan. I found myself acting like many people do in the presence of a knowledgeable industry analyst. I asked questions. One of them was: "What about this 3Com mess?" I'll let Rothman give his thoughts at SecurityIncite.com. Here are mine.
Remember that I was the only analyst who thought that the proposed Checkpoint acquisition of SourceFire was a mistake? I cheered when Checkpoint pulled out of that one. At the time they used the excuse that US government scrutiny of the deal would probably kill it. At that time Checkpoint was spooked because a Dubai based sea port company had trouble with some regulatory agency that no one had ever heard of before, the Committee on Foreign Investments in the US, or CFIUS.
This committee is evidently under the auspices of the US Treasury Department. It would be interesting for someone to challenge its constitutionality because it sure sounds fishy to me. Too date all it is doing is creating an atmosphere of fear among world organizations that are interested in making US investments.
I am not a huge fan of Wall Street suits that think they have a better idea when it comes to managing technology companies. Or any companies for that matter. Look where that got Kmart. In this case Bain Capital (yes, Mitt Romney's brain child) decided to get involved in the convoluted history of poor old 3com, the ethernet switching company. According to Heidi Moore at Deal Journal, Huawei, the Chinese company best known for cloning Cisco gear, was going to take a small stake in 3com as Bain took the majority of it. Then, later on, Bain would sell all of 3com to Huawei.
On the face of it, the part that got the attention of the regulators was the fact that 3com equipment, in particular TippingPoint IPS devices, are installed within many government agencies including the Defense Department. There is probably a good argument to be made that a company with close ties to the Chinese government should not own TippingPoint. So, Bain was offering to carve that out. 3com had already announced an intention to sping tippingPoint off as a publicly traded entity.
My concern is that the 3com deal just fell victim to an escalating spat between two governments. A spat that is not going to do any good for the global economy if it continues.
Update: Stiennon's blog has moved to here.