Tuesday, September 30, 2008

Bain bids on Huawei mobile handsets

By Mass High Tech Staff

Private equity firms Bain Capital of Boston and Silver Lake of London and New York have submitted formal offers for a stake in China’s Huawei Technologies’ mobile handset unit, according to reports by Reuters and other outlets.

Financial details of the bids, which have been expected since General Atlantic LLC pulled out of the bidding in August, were not disclosed. However, speculation surrounding the handset business has spurred industry insiders to suspect the deal could be significantly less than the $350 billion to $400 billion estimated three months ago.

Analysts say falling prices and rising materials costs have hurt the earnings of handset makers, and they point to Foxconn International Holdings Ltd., the world’s largest contract maker of handsets, as an example. Foxconn stock has fallen 69 percent this year and is the worst performer on Hong Kong’s benchmark Hang Seng Index, according to a Bloomberg report.

Huawei has been closely linked to Marlborough-based telecommunications equipment maker 3Com Corp. for several years. A deal between Bain Capital, 3Com and Huawei -- through which Bain would have acquired a majority stake in 3Com for $2.2 billion, with Huawei holding a minority stake -- was nixed this past summer, resulting in 3Com filing a lawsuit against Bain Capital for the recovery of a cancellation fee. However, in its most recent quarterly report, 3Com exceeded its revenue projections, citing sales through its Huawei partnership as a reason.

According to the Reuters report, several private equity firms including AEA Investors, Providence Equity Partners and Goldman Sachs’ buyout unit have all pulled out of the bidding for Huawei’s handset unit. Citing anonymous sources, Reuters also reports Huawei’s mobile devices unit doubled revenues last year to more than $2 billion.