Ouch! 3Com to be sold off

One of the biggies isn't doing that well anymore. From the NY Times: (use bugmenot for registration)

Bain and Chinese Company to Acquire 3Com
3Com, an unprofitable computer networking company, said yesterday that it had agreed to be acquired by Bain Capital Partners for $2.2 billion in cash in an arrangement that also gives a Chinese company, Huawei Technologies, a minority stake in the company.

The deal means the end of an era for a storied Silicon Valley company that has stumbled in recent years in the face of more nimble competitors like Cisco and Nortel.

It also provides yet another test case for Washington lawmakers wary of high-technology deals with Chinese companies that they think could compromise American security.

Edgar Masri, 3Com�s president and chief executive, said the buyout would help make 3Com more competitive. �Going private will give us more flexibility,� he said. �We will be able to focus on our long-term strategic objectives.�

China is certainly a strong trading partner but are they our friends? The Clinton love affair with China caused a number of security breaches at Los Alamos and other places. Hsu has questionable sources of funds. The Times looks at this:

The proposed sale is almost certain to attract close scrutiny in Washington, where Huawei has long attracted suspicions over supposed links to China�s military and intelligence agencies. The company�s reclusive founder and president, Ren Zhengfei, is a former Chinese army engineer.

Michael R. Wessel, a commissioner of the United States-China Economic and Security Review Commission, which was created by Congress to monitor bilateral relations, said that the federal government�s Committee on Foreign Investment in the United States �should take a hard look at this transaction� before allowing Huawei to buy part of 3Com.

Mr. Wessel, who also criticized the Chinese company Lenovo�s acquisition of I.B.M.�s personal computer business three years ago, pointed to reports this month that Chinese hackers had tried to penetrate military computer systems at the Pentagon and in Britain. He said that Huawei�s control of an important network security provider like 3Com would raise national security issues.

Let's see -- we are offering the Chinese access to devices that have CPUs in them, run code that is encrypted, and pass all of the internet traffic for personal, corporate and military computers... Sound like a good idea to you? Not to me...