November 15, 2011 12:01 am

Symantec sells stake in Huawei venture

Symantec has agreed to sell its nearly 50 per cent stake in a Hong Kong joint venture with Huawei Technologies back to the Chinese company at a profit, putting more distance between the largest seller of security software and a company whose networking gear has been blocked from some US projects on security concerns.

Executives of California-based Symantec said they would sell the company’s 49 per cent of Huawei-Symantec to Huawei for $530m because the operation had achieved Symantec’s objectives but would require greater investment in the years to come.

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The security company had initially invested $150m in 2008. Symantec had written the equity value of that investment down to zero because of operating losses at the Hong Kong-based venture, which makes storage, security and networking gear.

Enrique Salem, Symantec chief executive, said the venture had helped Symantec learn more about the telecommunications businesses which are Huawei’s biggest customers and to which the security company hopes to sell more directly. He said Symantec would continue to license its software to makers of security appliances, including Huawei for at least seven years.

A Symantec spokesman said politics had not been a factor, and Mr Salem said the company remained committed to the Chinese market, where sales have been growing and it still has 900 direct employees.

But the move comes amid escalating tensions between the US and China over cybersecurity. Earlier this month, the head of US counter-intelligence publicly accused China of overseeing massive theft of intellectual property from US companies and military secrets from the government. Symantec itself was hacked in breaches attributed to Chinese hackers, which Google disclosed in January 2010.

Huawei, meanwhile, is trying to move deeper into US telecom and government markets and has been frustrated as officials voice concerns about the trustworthiness of its gear.

The group has in effect been barred from acquiring two companies over the past four years by the US government, which also intervened in a separate attempt by Huawei to bid for a big contract with Sprint, the US telecommunications operator.

Officials cited “national security concerns” in blocking Huawei equipment from use in a nationwide emergency communications network. After that, Huawei executives took on a more aggressive tone, with a vice president calling on US decision makers to “stop the manufactured fear” and provide evidence justifying their stance.

In July, Huawei executives had said they planned to use the venture with Symantec to bring more networking gear to the US. But instead, they will now have to go it alone.

Additional reporting by Paul Taylor in New York

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