Huawei Rejects U.S. Recommendation to Sell Assets, Waits for Obama Ruling

Huawei Technologies Co., China’s largest phone networks maker, rejected calls by a U.S. panel to divest technology assets bought from 3Leaf Systems and will wait for President Barack Obama’s decision on the issue.

The interagency Committee on Foreign Investment in the United States had recommended last week that the Shenzhen, China-based company sell the assets after some U.S. lawmakers said the deal threatened national security. Huawei’s decision now leaves Obama with 15 days to take a stand on the panel’s suggestion, Bill Plummer, the Chinese company’s Washington-based vice president of external affairs, said in an interview today.

Huawei wants a fair review of its May purchase of patents from Santa Clara, California-based 3Leaf that five U.S. lawmakers termed a threat to American computer networks in a letter they wrote last week to the Obama administration. Huawei told the U.S. Commerce Department it bought the 3Leaf patents and then submitted the transaction at the end of November to the interagency committee on foreign investment, Plummer said.

‘In Good Faith’

“We’ve been engaged for two months, in good faith, in a process in which we have trust and great respect,” Plummer said in a telephone interview. “To withdraw would have an adverse impact on our brand and reputation. We want to see the process through. We welcome the presidential review.”

Plummer declined to disclose the value of the 3Leaf purchase, which he described as “very modest.”

Huawei, founded in 1988 by former Chinese army officer Ren Zhengfei, has struggled to expand in the U.S. as the federal government considers whether the company’s phone networks pose national-security risks. Members of Congress wrote at least two letters last year expressing concerns about the company’s activities in the U.S. A third letter last week raised concerns specifically about the 3Leaf purchase.

3Leaf, founded in 2004, developed technology for cloud computing, the lawmakers wrote. Cloud computing lets businesses and government agencies move applications and programs such as e-mail to remote networks owned and operated by a third-party.

Allowing Huawei and, by extension, China access to 3Leaf’s technology could pose a serious risk to U.S. computer networks as they increase use of cloud computing, Senators Jon Kyl, an Arizona Republican, Richard Burr, a North Carolina Republican, and Jim Webb, a Virginia Democrat, wrote. Republican representatives Ileana Ros-Lehtinen of Florida and Sue Myrick of North Carolina were the two other signatories to the letter.

Huawei has said the allegations are unfounded.

To contact the reporter on this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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