Huawei Pondering Startup Deals

Chinese vendor bought OptiMight, Cognigine, and may be hungry for more

March 22, 2004

3 Min Read
Huawei Pondering Startup Deals

Throughout the telecom recession, fast-growing Huawei Technologies Co. Ltd. has been pretty dormant in the M&A market and slow to make startup investments. And more activity may be on the horizon, as a Huawei spokesman says it is evaluating “several” startup deals right now.

Evan Bai, VP of business development and broadband at FutureWei, Huawei’s Texas-based subsidiary, says Huawei is interested in companies that will add to its intellectual property arsenal, as well as help it enhance its products and market size.

To date, it hasn’t rushed to do deals. Bai says Huawei has, in the past three years, reviewed more than 100 startup investment or acquisition opportunities. Out of that lot, it has only bought two startups and invested in one.

That, of course, is excluding Huawei’s joint venture with 3Com Corp. (Nasdaq: COMS). That arrangement is blossoming more slowly than expected, according to analysts, and has attracted the ire of Cisco Systems Inc. (Nasdaq: CSCO). (See 3Com Feeling Cisco's Heat.)

With just about half of its employees working in research and development, Huawei’s intellectual property stable is growing quickly. Last year, the company applied for more than 1,000 patents and successfully registered a total of 607 trademarks in more than 90 countries and regions.

In the first quarter of 2002, Huawei bought OptiMight’s intellectual property and assets. OptiMight, at one time, had built an optical transport box for long-haul networks that purported to be able to send up to 1.6 terabits of data per second -- 160 channels at 10 Gbit/s -- over any type of fiber without using Raman Amplification (see OptiMight Details Long-Haul Box).

The startup struggled to raise money during its life, but it did manage to score an equipment trial at WorldCom (now MCI) and another large U.S. carrier, according to its founder, Wu-Fu Chen (see Wu-Fu Chen: It's Tough out There and OptiMight: Check's in the Mail).

FutureWei’s Bai says that Huawei has maintained its relationship with MCI but won’t elaborate beyond that.

In mid 2003, Huawei purchased the technology developed by Cognigine, a startup with one of the industry's more awkward names (see Startup Spins Novel Network Processor). The company was building a full-duplex OC192 (10 Gbit/s) network processor for switches and routers.

Like OptiMight, Cognigine found that, though it had good technology, its market was too crowded and investors were unwilling to part with the cash it needed to survive independently (see Cogni-Gone?).

Huawei’s only other alliance with a U.S.-based startup came as it invested in free-space optics vendor LightPointe Communications Inc., and it's currently reselling its technology outside the U.S. (see LightPointe Teams With Huawei and LightPointe Attracts $17M).

Now more than ever, telecom startups need links with larger companies to help convince carriers to take them seriously. Huawei knows this and hasn’t opened its wallet all that often, even though the recession has brought valuations down to earth.

The company won’t say specifically how much it spent on OptiMight or Cognigine. Says Bai with a chuckle: “Not too much.”

— Phil Harvey, News Editor, Light Reading

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like