Report: China fears may have scuttled Nortel-Huawei deal

Concerns over Huawei's ties to the Chinese government and possible cyber-spying may have stalled a deal between Nortel Networks and Huawei for Nortel's metro Ethernet business, according to a report on

The Toronto-based company, which has seen its stock value evaporate in recent months and was reported to have sought counsel on a possible bankruptcy filing in December, received a $400 million bid for the business in September. The beleaguered networking vendor, which could have badly used the infusion of cash from the deal, saw it fall apart over concerns with Huawei's ties to China's authoritarian government.

Some of Nortel's customers that carry U.S. government data were spooked over the possibility of cyber-spying and would have stopped buying Nortel's equipment, which in turn caused Huawei to pull out. Forbes could not reach Huawei for comment.

Huawei has expressed an interest in getting a foothold in the North American market, and has said it hopes to make a big splash within five years.

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