Chinese top telecoms equipment maker Huawei Technologies yesterday said it has signed an MOU (memorandum of understanding) to acquire smaller domestic rival Harbour Networks.
Under the agreement, Harbour will transfer part of its assets, routers, optical networks and employees to Huawei.
All related IPRs (intellectual property rights) will also be transferred to Huawei. The value of the deal was not disclosed.
Harbour had been seeking listing overseas but failed to do so after its major investor withdrew venture capital from the firm last year.
Since then, the firm has been in financial difficulties.
In December, Siemens Communications Group reportedly signed a deal to buy a large portion of Harbour's assets for US$110 million. That deal didn't come off; industry observers believe that was largely because of an IPR dispute between Harbour and Huawei.
Harbour Networks was established in 2000 by former Huawei Vice-President Yi Linan who later hired several engineers from Huawei.
It has become a rival for Huawei in some business areas such as routers and optical networks.
In 2005, Huawei sent a letter to Harbour, warning the latter it might consider launching a lawsuit against Harbour's alleged IPRs infringements.
An acquisition could help to negate the possible lawsuit.
After failing to buy into Harbour, Siemens last month signed an agreement to buy Shanghai-based PhotonicBridges (China) Co Ltd, a local manufacturer of optical network transport products.
The deal was estimated at tens of millions of US dollars.
Huawei Spokesman Fu Jun said acquired assets from Harbour Networks will be integrated into Huawei, instead of having a joint venture between the Shenzhen-based firm and US networking hardware and software provider 3Com Corp.
The China-based venture Huawei-3Com Ltd was formed in 2003 and makes networking equipment.
Fu would not say when the acquisition of Harbour's assets will be completed, adding the two firms are still working on the details.
An analyst at Norson Telecom Consulting said the acquisition will help Huawei grow even stronger and boost Huawei's expertise with more engineers.
"Huawei is doing well in data communication products such as routers in developed countries and it is seeking a larger market share," added the analyst, who didn't want to be named.
Huawei early this year signed an MOU with Canadian communications giant Nortel Networks to form a joint venture for developing broadband access solutions for global markets.
Total revenue for the global broadband access equipment market was approximately US$9 billion in 2005.
The acquisition of Harbour's assets could be a good choice for Huawei as the two firms have similar corporate cultures, said the Norson analyst.
According to figures released by Harbour, its annual sales in 2003 were 1 billion yuan (US$125 million). Huawei's annual sales last year stood at 46.9 billion yuan (US$5.86 billion).
(China Daily June 7, 2006)