Huawei drops acquisition of cloud server vendor 3Leaf

Huawei has decided to withdraw its acquisition for pieces of U.S.-based cloud server provider 3Leaf. The decision follows the Committee on Foreign Investment in the United States' (CFIUS) suggestion that Huawei withdraw the acquisition due to security concerns about the Chinese company.  

At issue is a belief by the U.S. government that Huawei's founder Ren Zhengfei, a former People's Liberation Army soldier, continues to have ties with China's security services. Huawei, however, maintains there's no connection.  

Last May, Huawei acquired pieces of 3Leaf for $2 million, but Reuters reports that it did not file with the Committee on Foreign Investment in the United States (CFIUS), a government agency that reviews whether deals have national security implications, until November.

And while CFIUS wanted Huawei to "voluntarily divest" the 3Leaf assets, the Chinese vendor continued to hold out for a decision from the Barack Obama administration as late as Feb. 14.  

"This was a difficult decision, however we have decided to accept the recommendation of CFIUS to withdraw our application to acquire specific assets of 3Leaf," Huawei said in a statement.

Undaunted by the U.S. government's ongoing scrutiny, Huawei added that it "will remain committed to long-term investment in the United States. The significant impact and attention that this transaction has caused were not what we intended. Rather, our intention was to go through all the procedures to reveal the truth about Huawei."

This is not the first time that U.S. government scrutiny has forced Huawei's hand to back off from a U.S. deal. In 2008, Huawei dropped its bid for 3Com, and last year Sprint (NYSE: S) opted to block both Huawei and fellow Chinese vendor ZTE from getting a piece of its multibillion-dollar network modernization project because of mounting national security concerns about the Chinese vendors.

For more:
- Reuters has this article

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