Hewlett Packard sells 51 of China unit to create joint venture

The new entity, worth $4.5 billion, is expected to be a leader in China for computer servers.

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By :  ,  Financial Analyst

US tech giant Hewlett-Packard has announced it is selling a 51 per cent stake in its Chinese server business to Tsinghua Holdings for $2.3 billion (£1.4 billion).

Tsinghua Holdings' subsidiary Unisplendour Corp Ltd will acquire the 51 percent stake in HP's H3C Technologies to form a partnership affiliated with China's Tsinghua University.

The joint-venture, called H3C and worth $4.5 billion, is expected to be a leader in China for computer servers, storage and technology services. It will have about 8,000 workers and $3.1 billion in annual revenues, HP said in a statement.

US tech companies struggling in China

HP is the first major US tech company to pass control to local owners since Beijing stepped up restrictions on foreign firms and encouraged the use of local suppliers.

"HP is making a bold move to win in today's China," said chief executive Meg Whitman in a statement. "Partnering with Tsinghua, one of China's most respected institutions, the new H3C will be able to drive even greater innovation for China, in China."

US tech companies are also increasingly seeking local partners in China after being hit by Edward Snowden's revelations of a cyberspying program involving some large tech firms.  

HP's move comes a year after the tech giant announced a plan to split itself into two separate entities – with one focusing on PCs and printers, and the other on software and enterprise services.

The company is due to report results of its second fiscal quarter later today. Analysts expect HP to post per-share earnings of 86 cents on $25.6 billion in revenue and to forecast earnings of 87 cents on $25.9 billion for the third quarter ending in July.

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