Hewlett-Packard announced Thursday that it had agreed to sell a majority stake in several China-based businesses, including its data-networking operation, to a group owned by a Chinese university. The move, the company said, would create a “technology powerhouse.”
The $2.3 billion deal comes amid increasing pressure on foreign technology companies in China since revelations following disclosures of U.S. spying. The government has been encouraging the use of local suppliers and aims to purge most foreign technology from the country’s banks, military, and government enterprises by 2020.
HP is the “first major U.S. technology company to pass control to local owners since the government stepped up restrictions on foreign firms,” Bloomberg noted.
Under the deal, a group owned by Tsinghau University will acquire 51% of a newly created entity housing HP’s H3C Technologies networking operation together with its China-based server, data-storage, and technology-services businesses.
The new partnership, to be called H3C, will be “a technology powerhouse in China with a market-leading portfolio that will be #1 in networking and a leader in servers, storage and technology services,” according to HP.
“HP is making a bold move to win in today’s China,” HP chief executive officer Meg Whitman said in a news release. “Partnering with Tsinghua, one of China’s most respected institutions, the new H3C will be able to drive even greater innovation for China, in China.”
Bloomberg said that by selling control of the businesses to Chinese investors, Hewlett-Packard seeks to win sales to state-owned companies. In February, Whitman told analysts that HP’s networking units had “a rougher than anticipated” quarter, struggling in particular in China.
HP will retain full ownership of its less politically sensitive China-based enterprise services, software, HP Helion Cloud, Aruba Networks, printing, and personal-systems businesses.
The company limited the list of bidders for H3C to Chinese companies to help win Chinese government approval for the sale and to boost the operation’s prospects in China, The Wall Street Journal reported. The new H3C will have about 8,000 employees and $3.1 billion in annual sales.