Due to its Chinese unit’s disappointing performance, Hewlett-Packard Co. (HP) has sold 51% stake in the unit worth US$4.5 billion to the technical arm of Beijing’s Tsinghua University. With the Chinese government’s focus on developing homegrown technology, HP is positive that the state-owned Chinese firm’s majority stake in the company will increase its sales. After the announcement of the deal and its plan to separate into two companies, the computer maker witnessed a rise of 2.3% in its share price, after the markets closed in New York on Friday.
The Chinese government has been stressing the country’s military, banks, and major organizations to stop purchasing foreign technology. The government’s action can be traced back to Edward Snowden’s revelation, accusing the U.S. National Security Agency of spying through hacking the computers of Tsinghua University. President Xi Jinping has asked for faster development of the domestic technology industry and has created Internet Security Panel for the same. The Chinese government has been trying to strengthen the country’s technology sector at the expense of firms such as International Business Machines Corp. and Cisco Systems Inc. HP’s deal highlights the necessary step to be taken by foreign firms to succeed in the country. Due to the advantage of being a state-owned company with access to capital, Tsinghua beat its rival bidders such as China Huaxin Post and Telecommunication Economy Development Center, in the HP deal. Though China Huaxin Post and Telecommunication Economy Development Center is another state-owned firm, the government’s effort to avoid competition among the Chinese firms has led Tsinghua win the deal. The Chinese venture of HP has been named H3C and according to Qi Lian, the president of Tsinghua Unisplendour Corp, HP will help in managing the venture.