California based Hewlett-Packard (HPQ, Financial) Company or popularly known as HP has cut through a deal to associate with China’s Tsinghua Holdings Co. Ltd. by selling its stake in china based data-networking business worth 51% for about $2.3 billion leading to a strong partnership with the one of the top technology companies of china. Unisplendour Corp. Ltd. will acquire the H3C technologies as per information provided at Shenzhen stock exchange.
All about H3C
Founded in 1939, HP is an American multinational information technology company providing hardware, software and services to consumers, SMBs and large enterprises as well like customers in the government, health and education sectors. On the other hand, Tsinghua Holdings is a fully state-owned limited liability corporation getting investment from Tsinghua University and offers a wide variety of subsidiaries in the technology industry in China.
H3C is expected to generate annual revenues equivalent to other businesses of the company combined together. The unit came together with HP when the latter bought 3Com Corp. (COMS, Financial) in 2010 for about $3 billion. In 2003, H3C was officially formed, as a joint venture between Huawei Technologies Co. of China and 3Com. Huawei is the substitute for the alphabet H in the name and 3C comes from 3Com. As soon as its launch, the venture quickly gained grounds in the Chinese market and
By associating with Tsinghua holdings, HP intends to put forth H3C in Chinese market as a networking operation along with its china-based server, data-storage and technology-services businesses. The newly formed H3C is worth $4.5 billion as per a statement by the company, which previously had been valued at $5.5 Billion and is expected to become the leader in china market for computer servers, storage and technology services. The new venture, which will be a subsidiary of Unisplendour, will employee approximately 8000 people and have annual turnover revenue of about $3.1 billion. Rest of the businesses of HP in china including China-based enterprise services, PC Business and other operations in china will continue to remain under HP alone. The deal is estimated to get completed by end of this year after getting regulatory and shareholders approval.
Future Plans
HP had approached Credit Suisse Group (CS, Financial) for advice on the deal. The company has showed interest to make acquisitions in the corporate world with cash extracted through the H3C deal to help in the same. Recently, HP had declared its second quarter results, which showed a decline of 7% to $25.5 billion in revenue as compared to last year. A drop of 21% was recorded in the GAAP of the company taking the net earnings to $1 billion.
The deal with China’s Tsinghua Holdings is being considered as quite important and strategic to national security. With H3C, the company is expecting adjusted operating profit of $400 million and adjusted GAAP net income of $300 million. The new venture is also said to have 5700 patents and 2500 engineers.
