Motorola silences Huawei

The joint statement by Motorola and Chinese telecom gear maker Huawei last week to call a truce and drop all allegations against each other gives rise to 2 significant developments. One, it ups the morale of NSN which has been trying fiercely to secure the number 2 position in the US market and put a brave fight against its closest competitor, Huawei. Two, it gives Huawei a ray hope to expand its position in the US market which the Chinese company long viewed as key to its global expansion plans.

The joint statement by Motorola and Huawei said that they will dismiss their respective lawsuits with prejudice against each other. To dismiss with prejudice means they can not refile the same case against each other with same allegations. Huawei had sued Motorola early this year saying the transaction with NSN would lead to the transfer of Huawei trade secrets to a major rival.

“We regret that these disputes have occurred between our 2 companies,” Motorola Solutions chief executive Greg Brown said in a statement, referring to Huawei. He added, “After reviewing the facts, we decided to resolve these matters and return to our traditional relationship of confidence and trust.”

However, this settlement came with a price for Motorola. Nine months back Nokia Siemens had entered into an agreement with Motorola to buy the latter's networks unit for $1.2 bn. Now, after the settlement with Huawei, the deal value has been lowered to $975 mn. This indicates that the undisclosed amount that Motorola has agreed to pay Huawei could be the difference of the deal value-$225 mn.

It is still a matter of speculation w.r.t numbers but the exact number would be closer to the differential figure.

Settling the legal disputes with Huawei was one of 3 conditions outlined for closing the deal. When the deal was initiated last sumemr, both NSN and Motorola had expected to close the entire process by end of 2010. In February this year, a federal judge in Chicago barred Motorola from passing on confidential Huawei information to NSN until the 2 parties resolve the issue in arbitration in Switzerland. That injunction was now vacated, Motorola Solutions spokesman Nicholas Sweers said.

However, after the current developments both the companies are now targeting April 29 to seal the process. The other two requirements for closing the deal with NSN are receiving approval from the Chinese antitrust authority and clearing any other governmental or legal restraints.

According to a recent regulatory filing by Motorola, NSN can pull out of the deal if the conditions aren't met by April 26 and if everything goes well then the transaction will close by May 27.

The new agreement has not only lowered the deal value, but also reduced the manpower transfer from Motorola to 7,000 employees from 7,500 stated earlier.
Huawei has long been working to boost its image in many countries including the US. Early this year, the US government had forced Huawei to scrap a $2 mn acquisition of patents from 3Leaf, a Californian technology company, after the Committee on Foreign Investment (Cfius), the US body that scrutinizes cross-border deals for potential national security implications, refused to approve it.

The apprehension arises from the fact that Huawei's founder Ren Zhengfei, was an engineer in China's People's Liberation Army and that the firm's ownership structure is not transparent. Some experts also believe that the company might be an agent for the Chinese military.

Though Huawei has been mostly unsuccessful regarding acquisitions in the US, the company has done well on intellectual properties and is presently #3 according to WIPO in terms of overall patent filers from 2006 to 2010 followed by Qualcomm at #6, Ericsson at #9 and Nokia at #11 and this will definitely help the company in increasing its share in the US market.

Gyana Swain
gyanas@cybermedia.co.in