Motorola Acquisition Failure Signals Trouble For Huawei

North America continues to be a smudge on Huawei's meteoric climb to the upper echelons of the mobile gear industry after a blown acquisition bid further solidified its tumble from the world's number-two spot.

Huawei has been eager to make greater inroads into the North American market through acquisitions. But its top two targets went up in smoke after Monday's announcement by Nokia Siemens Networks (NSN) that it will purchase wireless network assets from Motorola for $1.2 billion, and Ericsson's $1.13 billion acquisition last year of Nortel Networks' mobile unit.

The purchase by NSN strengthened its position as the world's number-two telecom equipment maker, behind Ericsson and ahead of Alcatel-Lucent and Huawei, according to Dow Jones Newswires.

Losing the deal will mean the loss of some manufacturing contracts for Huawei. In the past, Motorola has employed Huawei as a supplier for all of its wideband code division multiple access (WCDMA) equipment for its wireless business.

"After we combine we'll be one company. These (supplier contracts) will be provided by Nokia Siemens Networks," said Zhang Zhiqiang, the general manager of NSN's greater China operations.

But the even greater blow against Huawei is that the deal once again confirmed problems it has strengthening its position in developed markets.

Huawei is desperate to establish itself in the North American market, and the Motorola deal presented an excellent opportunity for it to gain immediate customers in the region. But Huawei's negotiations cooled well before a deal was finally struck, and insiders said that concerns about clearing security hurdles may have played a role in the company's early exit from talks.

Huawei is dogged by suspicions in the United States that it is closely aligned with the Chinese government and military. Federal regulators must approve any sale of sensitive assets to foreign companies, and purported close ties to Beijing have cast a shadow over all of Huawei's negotiations in the United States.

Many analysts question the fairness of keeping Huawei on the outside, and the company has hired a significant number of lobbyists and advisors to help it overcome hurdles in America. But these moves have yet to help Huawei reap any major deals in the region.

Huawei's U.S. sales rose 53% last year, but represented less than 2% of its total revenue.