Huawei U-turn on US deal saves blushes

Huawei’s unexpected decision to capitulate to US demands to unwind a $2m patent deal has spared the Chinese telecommunications equipment maker from a potentially devastating judgment from President Barack Obama on the threat the company posed to US security.

Huawei revealed on Feb 18 that it would comply with the recommendations of a secretive US government panel that reviews foreign transactions, known as Cfius, and divest patents it acquired from 3Leaf, a small US company, last May. It was a reversal from the company’s position less than a week earlier, when it declared that it was seeking a final ruling on the deal from Mr Obama, who has the sole legal authority to issue such decisions on foreign deals under US law. But the incident has damaged the company’s reputation and global ambitions by revealing the skepticism with which US government officials view Huawei’s expansion plans. These came to light in 2008 when a planned acquisition of 3Com, a US router and switch maker, was scuppered for similar reasons. The Chinese group has since spent millions trying to improve the relationship. Analysts and attorneys unanimously agreed that President Obama would have sided with his national security advisers in the case and forced Huawei to abandon the transaction.