Chinese-Purchase Deal

John A. Quayle blueoval57 at VERIZON.NET
Mon Oct 1 21:24:44 MDT 2007



U.S. Defense Contractor
In Chinese-Purchase Deal
3Com 'intrusion prevention' technology maker
for Pentagon, Huawei founder is ex-PLA officer

September 29, 2007 -

The joint acquisition, announced yesterday, of 3Com, the U.S. 
computer networking group, by 
Capital, the U.S. private equity firm and China's 
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.

<file:///news/article.asp?ARTICLE_ID=57576>As WND reported earlier 
this month, China has already secretly planned a cberwar 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, 
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 ery 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 
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, 
<file:///news/article.asp?ARTICLE_ID=27044>Ren Zhengfei, is a former 
officer in China People's Liberation Army, as WND noted in 201. 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.

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 Huaei. 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.

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