U.S. defense contractor in Chinese-purchase deal

U.S. defense contractor
in Chinese-purchase deal
3Com is 'intrusion prevention'-technology maker
for Pentagon, Huawei founder is ex-PLA officer

The joint acquisition, announced yesterday, of 3Com, the U.S. computer networking group, by Bain Capital, the U.S. private equity firm and China's Huawei Technologies, a telecoms equipment maker, is being called "really worrisome" by a former Pentagon cybersecurity expert.

The $2.2 billion cash deal gives Bain an over 80-percent stake in 3Com and Huawei – pronounced 'wah-way' – just under 20 percent.

While 3Com is small compared to other Silicon Valley technology giants, its focus on sensitive communications networks raises alarms if ownership is transferred to a foreign firm.

3Com's products include "intrusion prevention" technology that helps its customers, including the Pentagon, protect their computer networks from hackers, reported Financial Times.

As WND reported earlier this month, China has already secretly planned a cyberwar attack – codenamed "Pearl Harbor II" by the Pentagon – that calls for a simultaneous assault on the U.S. aircraft carrier fleet in the Pacific and the disabling of communications at its headquarters at Pearl Harbor and with the Pentagon, leaving America's key allies in the Pacific – Japan and Taiwan – virtually defenseless.

The plan has been uncovered by intelligence specialists at Britain's Government Communications Headquarters and at the equally ultra-secret National Security Agency base near Harrogate in the north of the country.

Using a state-of-the-art software program called Moonpenny, the specialists have tracked the activities of the Chinese People's Liberation Army scientists based at their underground headquarters outside Beijing. The scientists have been briefed to achieve "electronic dominance" not only in the Pacific but over all China's global military rivals in the U.S., Britain, Russia and South Korea.

According to a recent U.S. Army War College report, the Pentagon believes China's military views cyber-attacks as "critical to seize the initiative" in the first stage of a war.

The Pentagon identified over more than 79,000 attempted intrusions in 2005, with about 1,300 being successful, reported the London Times. The Pentagon uses more than 5 million computers on 100,000 networks in 65 countries.

Larry M. Wortzel, author of the Army War College report, said: "The thing that should give us pause is that in many Chinese military manuals they identify the U.S. as the country they are most likely to go to war with. They are moving very rapidly to master this new form of warfare."

According to the Times, the People's Liberation Army sponsors competitions for hackers to find better ways to break into U.S. computer systems.

The Chinese connection in the 3Com acquisition, particularly given Huawei Technologies roots and history, are troubling to former Pentagon cybersecurity expert Sami Saydjari, now CEO of Cyber Defense Ageny. Huawei having ownership of hardware and network components linked to U.S. security would be "really worrisome," he told Financial Times.

The founder of Huawei Technologies, Ren Zhengfei, is a former officer in China People's Liberation Army, as WND noted in 2001. He owns 1 percent of Huawei and the rest belongs to an unidentified "union," according to Forbes. Most of Huawei's customers are state-run businesses in China.

In 2001 testimony before the House Subcommittee on International Security, Proliferation and the Federal Services Committee on Governmental Affairs, former professor Gary Milhollin, director of the Wisconsin Project on Nuclear Arms Control, singled out Huawei for using technology received from the U.S. to threaten the U.S. military.

In 2000, the CIA discovered Huawei was selling fiber optics equipment to Saddam Hussein, technology that would improve Iraq's military communications, in violation of the United Nations' international embargo.

At the time, Motorola had an export-license application pending that would have transferred U.S. know-how for constructing high-speed switching and routing equipment to Huawei. Such equipment allows communications to be moved quickly across multiple transmission lines – ideal for an air defense network.

Milhollin also notes Huawei was allowed by the Clinton Commerce Department to buy high-performance computers from Digital Equipment Corporation, IBM, Hewlett Packard and Sun Microsystems.

While the Bain-Huawei acquisiton raises questions about U.S. security, it is a lucrative offer for 3Com stockholders. The $5.30 per share offering price is 44 percent above 3Com's closing price of $3.68 on Thursday.

GOP presidential candidate Mitt Romney served as CEO of Bain Capital for 15 years prior to becoming governor of Massachusetts in 2002. His financial disclosure form last month showed that he and his immediate family earned more than $8 million in 2006 from Bain Capital, with stakes in more than 30 Bain Capital funds, the New York Times reported.