HP Networking will acquire Aruba and now it is selling 51% stake in H3C to a Chinese venture capital firm. What could this mean for HP Networking customers ?
The sale of a controlling interest in H3C means that HP Networking has government support (blessing?) to sell products in China. The Chinese government has been clear that it distrusts US technology vendors and been creating incentives for firms to use products designed and made locally on the basis that devices are less likely to have been compromised by state actors such as the NSA.
Of course, the trade benefits of buying local products are significant and probably a major driver in the decision. A government that keeps money in the economy creates jobs and sustain local businesses.
Other networking vendors have their growth strongly limited by loss of sales in China. There is speculation that Cisco’s sales volumes in China have dropped by more than 20%. China Unicom is one of the largest telco and has blocked Cisco from its backbone.
The purchase of Aruba Networks could be a step towards a geographical product strategy. H3C networking products are sold to customers in China and Asia while Aruba / ProCurve are sold to EMEA and Americas.
HP would be able to get substantial sales growth in the Chinese markets while Cisco, Junipers and others are locked out.