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A joint venture between 3Com Corporation and Huawei Technologies, American and Chinese networking-equipment manufacturers, illustrates the favourable impact of positive interactions on a critical relationship. 3Com chose to go ahead with plans for an alliance with Huawei despite a legal attack from its rival Cisco Systems on the Chinese company; this collaborative and trusting climate led to a strong relationship between the partners.
Having begun as a low-cost original equipment manufacturer (OEM), Huawei had moved up the value chain to develop a strong product line and R&D capability in network routers and switches.
Through the alliance, it sought to gain access to 3Com's strong brand name, a customer base in the United States, a cash contribution of US$160 million and 3Com's global distribution system.
For its part, 3Com had been suffering steadily declining sales for 15 quarters during a period of industry downturn and sought to recover its market presence through the alliance. 3Com sought to tap into Huawei's strong R&D capabilities to successfully compete against Cisco, the dominant global player.
Though 3Com's chief executive officer, Bruce Clafin, and Huawei's head, Ren Zhengfei, were enthusiastic about the potential alliance's promised benefits, it was threatened by an unexpected lawsuit from Cisco accusing Huawei of violating Cisco's intellectual property.
As legal pressure mounted, 3Com proved a trusting and collaborative partner. 3Com's Mr Clafin supported Huawei in three major ways:
FPublicly declared support for Huawei.
FIntervened in the lawsuit to legally declare that the 3Com-Huawei joint venture's product did not infringe Cisco's intellectual property. This was a significant risk for 3Com to take on, as it began ordering more products from Huawei and could be hurt by any broader findings of patent infringements against Huawei.
FDecided that if Cisco were to sue the joint venture, he would counter-sue. As a powerful company that possessed US patents, 3Com would be a very different target for Cisco.
Within months, Cisco suspended the lawsuit for a six-month period, agreeing to a third-party review of Huawei's technology. The following year, 20 months after it first sued Huawei, Cisco dropped its lawsuit in exchange for a promise from Huawei to modify its product lineup. Huawei also stopped selling its products that had been named in the suit.
Both Chinese regulators and the US courts approved the 3Com-Huawei joint venture amid the lawsuit. Besides helping to minimise the lawsuit's impact on Huawei, 3Com's support ensured a promising beginning to the joint venture. Within three months, 3Com's previously declining business in China doubled as a result of its combined strength with Huawei.
Both Pat Wesley & Thavorn Srisukato are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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