HP sells half of Chinese networking business H3C for $2.3 billion

US tech giant HP is selling 51% of its subsidiary H3C, which primarily sells networking equipment in China, to Tsinghua Holdings for $2.3 billion, with the new joint-venture keeping the H3C name.

H3C has been a subsidiary of 3Com, which HP acquired in 2010, and had originally been a joint-venture between 3Com and Huawei. Tsinghua Holdings is affiliated to Tsinghua University and will bring research and local legitimacy to a JV that also includes HPs Chinese server and storage operations.

“HP is making a bold move to win in today’s China,” said Meg Whitman CEO of HP. “Partnering with Tsinghua, one of China’s most respected institutions, the new H3C will be able to drive even greater innovation for China, in China. The combined company will build upon an extensive and valuable patent portfolio, best-in-class products and customer focus, and Tsinghua’s world-class research capability. In one move, we have repositioned HP and H3C to accelerate overall performance and better serve our customers and partners.”

Weiguo Zhao, Chairman of Tsinghua Unigroup and Unisplendour Corporation (the subsidiary involved in the JV), said: “H3C is a leading networking provider in China and HP China is a leading provider of servers, storage and technology services. Tsinghua and Unisplendour, as the majority shareholder of the new H3C, will embrace and welcome the new H3C to the family of the China domestic IT industry.

“The transaction for H3C will also release great potential in the China market. Tsinghua has enjoyed a long-term partnership with China HP and H3C. We see extensive synergies with the new H3C. Tsinghua University’s leading R&D capability, wide domestic resources, and vast human capital resources will empower the new H3C’s growth in the short-term, mid-term, and long-term. We are pleased to announce and look forward to a strong partnership with HP in the many years to come.”

Reading between the lines this seems to be a way to overcome some of the cultural and political obstacles faced by foreign tech companies looking to operate in China. There have been accusations in both directions between China and the US about spying, so any gear that’s used for communication comes under suspicion. There’s also a fair bit of reciprocal protectionism going on so HP will be hoping that giving majority control to a trusted Chinese institution will make much of this hassle go away.