Defecting from Google to Facebook: It Must Be All About the Benjamins

Don’t get me wrong. I understand why ambitious Googlites who’ve done their four or five years of service at the company — and cashed out their options — might want to test their mettle in entrepreneurial pursuits, joining exciting startup companies trying to launch new technologies, solving intractable new problems, and generally advancing into unexplored realms of possibility.

What I don’t grasp is why Googlites would defect from the search-and-ad giant to the lame, privacy-invading, one-trick social-networking pony called Facebook. I mean, think about it. Facebook is one stiff wind from falling off the industry cliff into the valley of oblivion. Even Microsoft knows it, which is why it is suddenly reconsidering all the online properties they passed over in favor of their ludicrously wrongheaded investment in the social-networking flavor of the Web 2.0 month.

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Bain-Huawei Acquisition of 3Com Remains in Limbo

Despite the best efforts of all involved, the acquisition of 3Com by Bain Capital and Chinese networking-gear vendor Huawei remains in considerable doubt.

The parties seem unable or unwilling to modify the terms of the agreement enough to persuade the Committee on Foreign Investment in the United States (CFIUS) to drop its objections to the deal on national-security grounds.

Iomega Now Receptive to EMC Takeover Bid

Given market volatility — and, believe me, technology markets will not be spared from the travails afflicting the broader economy — Iomega is wise to reconsider its earlier rejection of EMC’s acquisition overtures. Unless Iomega’s shareholders are inordinately youthful, they ought to jump at any reasonable offer from the storage giant.

My Advice for Bain and Huawei on the 3Com Deal

After going back to the drawing board to devise a deal structure that might passe muster with the Committee on Foreign Investment in the U.S. (CFIUS), Bain Capital and Huawei still don’t seem to have fashioned a proposal that will give them the dubious privilege of owning 3Com Corporation.

If Bain and Huawei still with to consummate an acquisition of 3Com — with Bain claiming 83.5 percent of the acquired company and Huawei holding the remaining 16.5 percent — they’ll have to respond meaningfully to persistent US government concerns regarding the national-security implications of the deal. To do that, Bain and Huawei, a powerhouse Chinese networking-equipment vendor with close ties to China’s military and government, must make certain concessions.

If the report in yesterday’s edition of the Wall Street Journal is accurate, the two companies still haven’t found a winning approach. To illustrate the problem, I will highlight a paragraph from yesterday’s news item:

3Com also supplies the U.S. government with some security software, including applications that help protect the Pentagon from online attacks. Bain and Huawei previously said they would be willing to sell the unit that handles these contracts. The business, called TippingPoint, wouldn’t be sold until after CFIUS approves the deal.

That’s not good enough. Bain and Huawei must not only “be willing to sell” the TippingPoint business unit, they must commit to doing so — on paper, in unambiguous, binding terms. In fact, I would argue that it would be preferable if Bain and Huawei were to sell the TippingPoint unit, either privately or in a public offering (okay, I know that’s not about to happen in current market conditions), before CFIUS is asked to approve the deal. If it is not practicable for TippingPoint to be divested before then, a viable recourse is for Bain and Huawei to legally commit to a divestitute of TippingPoint within a specific period of time — say, six months — of the CFIUS approval of the 3Com purchase.

But I don’t think that will be acceptable to CFIUS. The concern persists within certain US intelligence agencies that Huawei, as a co-owner of TippingPoint, will be in a position to exploit sensitive technologies and to facilitate classified technology transfer on behalf of Chinese government agencies.

Ideally, CFIUS would not want Huawei to own TippingPoint, even as a minority partner, for any length of time. A possible compromise is for Bain and Huawei to agree to hive off TippingPoint as a separate entity, with no interaction between Huawei and TippingPoint, during the interval between the acquisition of 3Com and the divestiture of TippingPoint. I don’t know how that work in practice, however, nor do I know about the legality of such an arrangement.

Is 3Com really worth all the trouble? I would think not, and so would most reasonable observers, which just makes everybody a bit more suspicious about the benefits Huawei believes it will derive from this deal.