By Eva Dou And Don Clark
Hewlett-Packard Co. is making changes to top management at a
subsidiary in China that has recently been hit by worker
protests.
H-P Chief Executive Meg Whitman told employees of Chinese
network equipment subsidiary H3C Technologies Co. on Sunday that
former H3C Chief Operating Officer Henry Xiang-Ying Cao would be
promoted to CEO of the subsidiary, according to an internal email
reviewed by The Wall Street Journal. He assumes a post that had
been held by Jessie Jing-Chuan Wu, who will become vice chairman,
according to the message.
Ms. Whitman has also offered workers long-term financial
incentives, according to a separate email Friday that was also
reviewed by the Journal.
Workers at H3C had been pushing for incentives and had protested
a recent move that made H-P China Chairman Bob Mao double as the
unit's chairman. The company hasn't reversed that appointment.
The turmoil at H3C comes after the Journal reported in October
that H-P has run a process to find a domestic buyer for a majority
stake in the Chinese operation since last year, according to people
familiar with the situation. H-P decided to explore selling around
half of the business, targeting domestic buyers who could help H3C
win more domestic contracts, they said. Potential buyers for the
stake include domestic private-equity firms and Chinese technology
companies, or a combination of the two, they said.
The business, which could be valued at up to $5 billion in a
sale, has its roots as a unit of Huawei Technologies Co., but under
H-P's ownership risks being viewed as a foreign company as China
looks to boost its domestic technology companies. Many U.S.
companies have faced increasing difficulties in doing business in
China, in the wake of mutual suspicion between the countries about
the possibility that foreign-made equipment could be exploited for
intelligence-gathering purposes. H-P hopes it can continue using
the Chinese operation as a manufacturing base for its global
networking business after the stake sale, these people said at the
time.
"H-P remains committed to the China market and our H3C
business," an H-P spokeswoman said Sunday. "With today's changes,
we are confident that we have the right leadership team in place to
continue to grow in this important market."
A potential change in control at H3C figured into the protest by
workers, some of whom stopped coming to work over the past week and
posted slogans in their offices. Some employees, in interviews,
pointed to what they said is a conflict between H3C's ownership by
a U.S. company and the unit's aspirations to be a main supplier of
networking equipment to the Chinese government, which has become
increasingly wary of foreign communications gear in the past
year.
Some workers also said a tighter integration between H3C and HP
China--represented by the appointment of Mr. Mao--would hurt the
long-term prospects of their company. They sought a new internal
leader instead, and asked for stock so that if the unit were sold
they would also benefit.
Workers said they were returning to work Monday as their newly
elected representative committee discussed whether they would
accept the new terms.
Ms. Whitman wrote that she had talked with Ms. Wu over the
weekend before deciding to change the unit's leadership structure.
"Her candid insights and strategic vision were invaluable to me in
better understanding the best path for H-P," Ms. Whitman wrote.
She also said Mr. Cao is the right person to follow in Ms. Wu's
footsteps.
"As you all know, China is not only critical to H-P's long-term
success, but it is also a very special place for me personally,"
Ms. Whitman wrote. "The future of H3C is in our hands, and I am
counting on all of you to ensure that we close the quarter strong
and deliver an outstanding 2015."
H3C has built a reputation as a credible rival in some varieties
of networking equipment to Silicon Valley giant Cisco Systems Inc.,
in some cases using lower prices to build its market share. The
company was formed in 2003 as a joint venture between the
U.S.-based 3Com Corp. and China's Huawei.
3Com bought out Huawei's stake in 2006. H3C became a unit of H-P
after the big technology company purchased 3Com in a $2.7 billion
deal announced in 2009.
Rick Carew in Hong Kong contributed to this article.
Write to Eva Dou at eva.dou@wsj.com
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