Report: HP Seeks Buyers For Chinese Networking Business

Hewlett-Packard is seeking to sell a stake in its Chinese corporate networking business in a deal that could bring HP several billion dollars in cash, according to a report by The Wall Street Journal.

HP has sought out private equity firms in China and is in the "early stages" of selling at least 51 percent of its H3C Technologies, according to the article. The Wall Street Journal reported the Chinese networking business is worth about $5 billion.

HP is not commenting on the report.

[Related: CRN Exclusive: HP CEO Whitman On Dell, Autonomy, And Future HP Acquisitions]

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A top executive for a HP systems integrator partner, who did not want to be identified, said the Chinese deal could give HP an edge in the booming Chinese market against Cisco.

"This is a wedge against Cisco," the executive said.

The executive compared the HP Chinese networking deal to Yahoo's move to buy a 40 percent stake in Chinese ecommerce giant Alibaba in 2005. That deal netted Yahoo a $7.6 billion windfall.

"This is all about finding a way to make it big in the Chinese market," the executive said. "Look at how Twitter is moving into China by giving away a mobile developer's kit. It is a different market. So you have to approach it differently. This could end up being one of HP's most brilliant moves."

Twitter, which had its micro-blogging service blocked in China, said this week it plans to unveil a set of services for mobile developers as a way to start business relationships with developers in China.

The potential HP move comes as HP networking rival Cisco has come under fire in China because of revelations that the National Security Agency agency intercepted Cisco networking equipment from the vendor and planted spyware in the gear.

H3C was established through a joint venture between Chinese networking giant Huawei Technologies and networking equipment maker 3Com, which HP acquired in 2010 for $2.7 billion.

No matter what happens with the H3C, HP is expected to continue to battle Cisco aggressively with its own HP networking gear.

HP CEO Meg Whitman told CRN last week that HP has a significant price and total cost of ownership advantage over Cisco that it will press forward with more aggressively as Hewlett-Packard Enterprise, one of two companies that will be created once HP's split is completed.

"We have a real opportunity with our HP Networking Group," she told CRN. "We have gained share every year and we need to accelerate that share gain whether it is software-defined networking, campus, branch, wired/wireless convergence, the data center. There is a big opportunity here. HP Networking will get more attention I think in Hewlett-Packard Enterprise."