US government questions Huwaei on "sneak" 3Leaf Systems acquisition

Huawei Technologies Ltd, the Chinese telecom network gear maker, run by a former Chinese People's Liberation Army officer, has run into rough ground in the US with Washington asking it to seek approval for its $2-million acquisition of a small US start-up company in May 2010.

Shenzhen-based Huawei, which is already under intense scrutiny in many countries including India, has been asked by the US Committee on Foreign Investment (CFIUS) to secure retroactive clearance for its acquisition of 3Leaf Systems, The Wall Street Journal today reported citing reliable sources.

CFIUS, which is chaired by the Treasury Secretary Timothy Geithner and has representatives from the Defence and Homeland Security departments, is empowered to review acquisitions that could have national security implication

CFIUS does not formally block a deal, but informs American companies to voluntarily drop a transaction if it finds that the deal is not in the interest of national security. However it has blocked three Chinese deals earlier.

Huawei acquired the staff and intellectual property of Santa Clara, California-based 3Leaf Systems, a start-up company that provides server virtualisation solutions to support scale-up and scale-out virtual servers in enterprise data centres.

Founded in 2004 as 3Leaf Networks, the company's V-8000 delivers server virtualisation by virtualising the networking and storage I/O for large pools of computer nodes that makes several computers work together like a more powerful machine.