Report: U.S. Panel to Recommend Reversing Huawei Deal

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A U.S. committee that oversees foreign investments will likely recommend that President Barack Obama reverse a deal that would allow Chinese network supplier Huawei to acquire intellectual property from a U.S. start-up, according to a report by The Wall Street Journal.

If the deal is reversed, it would be the latest in a string of setbacks the Chinese company has seen with its business deals in the United States, stemming from security concerns over Huawei's possible ties to the Chinese government.

Huawei already paid US$2 million in May 2010 to acquire intellectual property and to hire staff from 3Leaf Systems, which specializes in grouping servers together to run as more powerful mainframe computers. But the deal occurred without a review by the Committee on Foreign Investment in the United States (CFIUS). Pentagon officials then asked Huawei to clear the deal with CFIUS.

The committee's review of the deal is still pending. But the Journal reports that CFIUS will make a decision on Huawei's acquisition this coming Monday. "The transaction still could be approved, and the president is free to disregard a recommendation by the committee," the report added. In the past, the president has vetoed foreign transactions only two or three times.

Huawei is one of the world's largest telecommunications equipment suppliers. But U.S. lawmakers have derailed deals the company has tried to pursue in the past. Government officials worry the Chinese military could use Huawei products to disrupt or spy on U.S. communications.

Last year, Sprint Nextel reportedly turned down a bid from Huawei to improve its networks, due to U.S. government concerns. Huawei had also sought to purchase network equipment vendor 3Com, but was forced to abandon the deal in 2008.

Huawei could not immediately be reached for comment.

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