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3Com, Huawei Join Hands Behind Cisco's Back

Seeing an opportunity to take a swipe at the competition, network equipment makers 3Com and China's Huawei Technologies Wednesday said they have formed a joint venture in Hong Kong.

With principal operations in Hangzhou, China, the name of the joint venture will be 3Com-Huawei in English and Huawei-3Com in Chinese.

Under the terms of the agreement, Huawei will be providing its brand of products including LAN switches, routers, engineering, sales/marketing resources and personnel, and licenses to its related Internet protocol .

For its part, 3Com said it will pitch in $160 million in cash, assets related to its operations in China and Japan, and licenses to its related IP.

Santa Clara, Calif.-based, 3Com will have the right to sell the partnered products under the 3Com brand everywhere in the world except China and Japan where the products will be sold under the Huawei-3Com brand. In the markets of China and Japan, the venture will sell both the former Huawei networking product line, which has been transferred into the new partnership, as well as the existing 3Com product line based on an OEM agreement between the joint venture and 3Com.

"The renowned 3Com brand and global distribution channels offer [us] immediate and long-term opportunities," said Mr. Ren. "The JV globalizes Huawei's emerging enterprise networking business much more rapidly, enabling the products we have developed to be sold in nearly every major country in the world. 3Com and Huawei are contributing complementary businesses with very little redundancies or overlaps in product line and regional sales/distribution channels."

Even if the two companies are not overlapping each other, they are both in a fierce dog-fight with San Jose, Calif.-based networking equipment giant Cisco Systems .

Huawei Technologies is being sued by Cisco for allegedly unlawfully copying its software.

3Com has always played second fiddle to Cisco's dominance in selling networking equipment. The rivalry has forced 3Com to sell off its CommWorks subsidiary as well as reverting to wild sales tactics to keep in the hunt for marketshare and space on server racks.

"The JV's products will neatly complement 3Com's existing portfolio," said 3Com president and CEO Bruce Claflin. "3Com-Huawei delivers a high-end extension to our existing products, allowing us to offer complete solutions to our customers."

Claflin has also been named chairman of the partnership's board of directors and Huawei president and CEO Ren Zhengfei, has been appointed chief executive officer. Huawei will own 51 percent and 3Com will hold a 49 percent ownership in the joint venture. In two years 3Com has the option to own 51 percent in which case Huawei would own 49 percent.

With Huawei by its side, 3Com says it will have better opportunities to expand its geographical footprint. 3Com has a strong presence in Europe and the Americas while Huawei has an established sales and distribution network, strong brand name and highly regarded reputation in China and Japan.

More than 1,000 Huawei employees are expected to join the joint venture, and more than half will have technical expertise. 3Com will contribute approximately 50 employees.