Rival dongle makers Option, Huawei in surprise tie-up

By Robert-Jan Bartunek

BRUSSELS (BestGrowthStock) – Belgian wireless Internet device maker Option (OPIN.BR: ) and arch-rival Huawei Technologies (HWT.UL: ) announced a surprise agreement on Wednesday to cooperate on research and development and share technology.

The two companies, locked in a dispute over alleged Chinese subsidies and dumping, said they would work on joint research and development projects in telecoms and were looking at establishing a joint R&D center in Belgium.

Option said the deal would allow it to focus on software, embedded modules and security modules and place less emphasis on the sale of USB sticks, an increasingly commoditized business.

“We keep our independence, that’s important,” Chief Executive Officer Jan Callewaert told Reuters in an interview.

Chief Financial Officer John Ziegler said Option had not yet decided on the future of its commoditized USB business, which was the subject of a dispute over alleged Chinese subsidies and dumping.

“We will see how the market plays out,” he added.

Ziegler said the deal would not prevent the two companies from competing with each other.

KBC Securities, which upgraded the stock to “hold” from “sell,” said the deal solved Option’s liquidity problems, providing it with more time and money to develop further a new strategy focusing on more value-added products.

Shares in Option leapt to eight-month highs, having fallen from a peak of over 16 euros in 2006 to less than 1 euro. They were up 44 percent at 0.72 euros at 7 a.m. EDT.

Option said it had withdrawn all anti-dumping and anti-subsidy complaints against imports of wireless wide area networking modems from China.

It and Huawei will work on joint research and development projects in telecoms and are also looking at establishing a joint R&D center in Belgium.

Huawei agreed to license Option’s connection manager software, for which the first year of the license is valued at 27 million euros ($37.68 million), which could be extended to 18 months for up to 33 million euros.

China’s Huawei would acquire Option’s semiconductor company M4S, making chips for next-generation telephony, for about 8 million euros.

The company asked the Belgian government to withdraw its so-called safeguard request, and asked the European Commission to close all three investigations. Option, Europe’s only maker of cards, USB sticks and embedded modems for surfing the net on laptops, has repeatedly blamed “unfair” trade practices of Chinese competitors for a string of losses stretching back to the second quarter of 2008.

ZTE (0763.HK: )(000063.SZ: ) is its other main rival.

(Additional reporting by Philip Blenkinsop; Editing by Erica Billingham and Sue Thomas)

Rival dongle makers Option, Huawei in surprise tie-up