August 10, 2005

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China's Takeover Plans, Part II

Here we go again. Just as the CNOOC/Unocal brouhaha bites the dust, another tremor on the faultline of East-West relations begins. Ah, why can't China stick to buying computer companies and washing machine brands, ask the United States?

China's Huawei Technologies is offering US$1 billion for Marconi, a British telecommunications firm. Simple - one communications firm buying another, right? Wrong. This is not just about putting an established, sagging British brand name on a rising line of Chinese products.

Marconi has a rich history of not only being in the telecommunications business, but being a major contractor over the years for defense industries - its employees played crucial roles in defeating the Nazis in World War II. Its founder, in fact, invented the radio. And today, Marconi sells as part of its product line the Ovum-RHK series of networking encryption technology used by the US military and its intelligence agencies. So what, you might ask? Well, here's the problem - Huawei Technologies was spun off from the People's Liberation Army.

We suspect this takeover may be even less of an open-and-shut case... sit back and enjoy the show.

posted by HK Dave on 08.10.05 at 01:35 AM in the


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Wow, Marconi's for sale? They're iconic. It'd be like the Germans buying Rolls Royce or Rover. Oh, wait, didn't that kind of happen already?

posted by: RP on 08.10.05 at 05:05 AM [permalink]

And the proposed sale is likely to be shot down faster than you can say, "Jack Robinson". There is simply no way in hell a corporation with that kind of military-use technology is going to be sold to China, particularly when it is virtually certain that the technology, if acquired, would find its way into the PLA's paws.

RP, that'd also be like the time Malaysia's "national car manufacturer", Proton, bought Lotus. Of course, that's a whole different kettle of fish, since to my knowledge Lotus, Rover, and Rolls are not military. (I believe Germany bought the Rolls car-making business but the Rolls Royce engines business is still in British hands, though I could be wrong.)

posted by: Nolan Winthrop on 08.10.05 at 09:03 AM [permalink]

What's so fascinating for me is that a culture that is very separate from the West is so eager to buy into the west. Fascinating. It's such a separate culture, wishes to be by itself. Strange.

posted by: doug crets on 08.10.05 at 12:07 PM [permalink]

Yes, I guess perhaps the difficulties of translating Chinese marketing strategies into Western markets makes the purchase of a Western brand name appealing.

There may be a solution to this Huawei transaction though - Marconi could just be forced to divest all assets sensitive to Britain or America's national interests before its sale to Huawei. As I understand it, those assets only make up a small portion of the overall company.

However, that still leaves Huawei in the uncomfortable position of having to bid for massive contracts from unsympathetic Western governments or large corporates while being tarred with the brush of being associated with China's military.

posted by: David on 08.10.05 at 12:20 PM [permalink]

This is a trackback.

"Should Marconi be sold to a Chinese company? Each government's definition of its 'national interest' can be very costly. To taxpayers, to private sector employees, to shareholders, etc, etc."

posted by: IJ on 08.11.05 at 01:14 AM [permalink]

I remember a conversation I had with the British COnsulate business section people about Marconi last year. They said that the company is pretty crap everywhere else--apart--from China. Not surprising, then, that China seeks to buy it.

Another fine investment decision from the Chinese. I don't think that anyone else would touch Marconi with a bargepole myself.

However, time will tell how things go with this but I reckon it's just yet another attempt at buying a clapped-out foreign brand.

posted by: Martyn on 08.11.05 at 07:26 AM [permalink]

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