US committee considering Huawei deal block

A US governmental committee looks set to recommend a review and potential blocking of an acquisition made by Chinese telecoms giant Huawei.

The Committee of Foreign Investment in the United States (CFIUS) is scrutinising a $2 million deal made between Huawei and Californian firm 3Leaf Systems on grounds of national security.

The deal concerned assets of the firm that develops technology to allow collections of server computers to work together as  a more powerful machine.

While CFIUS does not release information on the investigation, a WSJ source mentioned that a decision is due on Monday concerning whether to make a formal recommendation to the president.

The president would be under no obligation to follow the recommendation, however it is believed that companies usually withdraw their case upon hearing of a recommendation against them, with only two or three vetoes believed to have occurred from the presidential level.

The case has been going on for a number of months now following disgruntlement in the US over Huawei’s undeclared acquisition of 3Leaf Systems, with the firm claiming that it did not require clearance in this instance.

So far it is known that Huawei has hired fifteen 3Leaf employees, owns several former 3Leaf patents and has purchased the company’s servers out of bankruptcy.

“Huawei has been engaged in the CFIUS process related to 3Leaf in good faith for a number of months now and looks forward to the process concluding,” said William Plummer, vice president of government affairs for Huawei.

The relationship between the US government and Huawei has been fractious in the past, with a potential deal with Sprint blocked by the US again over security issues, with particular concerns over the telecom firm’s links with the Chinese military.

Huawei, the world’s second largest telecoms company with revenues of $28 billion, is one of two that have been perceived as a thorn in the side of the US of late.

ZTE, also involved in a deal with Sprint, has given the US a lesson in capitalist business  by demanding less state interference in deals, expressing frustration at being blocked from expansion in the States in the past.

“The government ought to promote a fair, equitable, regular and no cost commercial atmosphere, and it shouldn’t interfere,” ZTE’s finance chief contended on Wednesday.