Could HP Possibly be Selling its H3C Unit in China?

The China-based company under Hewlett Packard (NYSE:HPQ) could possibly be up for grabs in the Chinese market, according to the Wall Street Journal.

According to a news report by the Wall Street Journal, HP is planning to sell-off 51% of its stake in its China-based company H3C Technologies to private-equity firms in the Chinese market. If the deal goes according to plan, at-least 51% stake of H3C will be sold. According to analyst estimates, a full-scale sale of the china-based company will be valued at around $5 billion.

The potential sell-off news came after HP announced its split into two separate entities on Oct 6, restructuring the entire company into two distinct parts; one part focused on developing technology for corporations, such as servers, storage devices, software, services, and the other part focused on making personal computers as well as printers for consumers.

H3C Technologies, based in Hangzhou, China, is a supplier of business data-networking systems. The company came under HP after it acquired 3Com for a price of $2.7 billion back in 2010. H3C currently employs over 5000 people worldwide.

Although it is possible that another technology firm in China may wish to purchase the HP-led company, the H3C sell-off will most probably be made to private-equity groups.

This rapid re-structuring of HP seems in accordance with the changing market. According to Meg Whitman, who is the chief executive of HP, the split and consequent restructuring of the company will enable the company to “more aggressively go after the opportunities created by a rapidly changing market.”

The split is in accordance with Whitman’s 5-year growth plan for HP under her governance. According to Whitman, the split will “provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics.” The move is designed to generate the competitive edge HP needs to succeed in the rapidly growing technology market, especially in the US.

The split of the company is part of the major remodeling currently being experienced by HP, of which the H3C sell-off is a part. HP also initially announced that in a major remodeling of its business model, the computer-making giant will be laying off over 50,000 employees (figure inclusive of retirements). This figure later rose to 55,000.

Whether this is the sole reason why HP is selling off its Chinese business is still unclear. Recently, Cisco Systems, Microsoft and IBM have faced challenges in China because of backlashes resulting from news reports about U.S. surveillance programs running in the country. HP may very well be selling off its Chinese business to avoid any additional costs.

No confirmation about the H3C sell-off has come directly from HP yet and the company has declined to provide any comments on this situation yet.

However, Hewlett Packard (NYSE:HPQ) is likely to retain some of its stake in H3C to secure future business deals with the company, as the low-cost component-manufacturing Chinese company provides economies of scale.

What the future holds for HP is still to be seen; however these major changes suggest that HP is doing its best to survive in the era of cut-throat competition and fast changing technological developments.