Option Drops Complaints Against Huawei

Belgian wireless modem maker Option NV (Euronext: OPTI; Nasdaq Europe: OPIN) has dropped its anti-dumping and anti-subsidy complaints against Chinese wireless modem imports and asked the European Commission to close all three investigations into the pricing practices of Chinese vendors, as the company reached an agreement with Huawei Technologies Co. Ltd. today. (See Huawei, Option Sign Agreement.)

The wide-ranging accord that caused Option's dramatic about-turn today includes a joint research and development plan; a software licensing deal in which Huawei will pay Option €27 million (US$37 million) in the first year to use its connection manager software; and an agreement for Huawei to acquire Option's wholly owned semiconductor company, M4S, for €8 million ($11 million).

All of this has served to quiet what had become Europe's most vociferous -- and unprofitable -- protester against the business practices of Chinese companies selling wireless dongles into Europe. Option filed anti-dumping and anti-subsidy complaints with the European Commission, and the EC launched separate investigations this year in June and September, respectively. Option claimed that Chinese importers of "wireless wide area networking (WWAN) modems" were dumping dongles onto the European market at unfairly low prices and that the state subsidies they received were illegal according to European Union law. (See Will EC Probe Huawei, ZTE?, Huawei Hits Back at Dumping Claims, and Euronews: Sept. 17.)

Since then, the two companies have been locked in disagreement over Option's complaints and allegations, which Huawei emphatically rejected as "wholly inaccurate."

Now, however, the companies have agreed on terms for collaboration.

In addition to agreeing to work together on R&D projects, the companies are exploring the possibility of setting up a joint R&D center in Belgium. They are also looking at ways to contribute resources to develop new wireless broadband products and software.

Under the licensing agreement for Option's connection manager software, the first year of the contract is valued at €27 million (US$37 million). The license could be extended for up to €33 million ($45 million) over the next 18 months.

As for the semiconductor business, which Huawei has agreed to buy, what will the Chinese vendor get? According to Option's press release today, the M4S business is developing a "next-generation radio frequency chipset to be used in 4G devices." The company says it started the process of selling this business in July.

Through this agreement with Option, Huawei has warded off a lengthy and resource-consuming investigation in Europe for itself as well as for ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). And for Option, news of the agreement boosted its share price by 40 percent to €0.70 ($0.96) in morning trading on the Brussels stock exchange.

— Michelle Donegan, European Editor, Light Reading Mobile

Michelle Donegan 12/5/2012 | 4:20:10 PM
re: Option Drops Complaints Against Huawei

This is an amazing change for a company who just a couple of months ago stated in its half-year results press release:

"The market for Option remains challenging primarily due to the unfair trade practices of Chinese competitors and the uncertain economic outlook. "

Now the European Commission has to decide whether or not to close these investigations.

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