The company's official said it would abandon its efforts to acquire assets of the US computer company as recommended by a security panel.
"Huawei Technologies Ltd has withdrawn its application to the Committee on Foreign Investment in the United States (CFIUS) for approval of its purchase deal with 3Leaf Systems," state run Xinhua news agency quoted a Huawei senior executive as saying.
"That means Huawei will also pull out of the 3Leaf Systems purchase deal," the executive said on condition of anonymity.
Huawei bought servers and intellectual property rights from bankrupted 3Leaf Systems last May for USD 2 million.
Huawei said it did not apply for approval from the CFIUS in advance because it bought only assets of the company, not the company itself, the report added.
On February 11, the CFIUS recommended Huawei to part with the assets it had bought, citing security reasons.
Huawei, however, said it would not withdraw from the purchase and welcomed the US security panel inquiry.
"It's a hard decision, but we have decided to accept the CFIUS recommendation to withdraw our application to acquire specific assets of 3Leaf Systems," Huwaei said.
"There will definitely be a series of steps taken to (cancel the deal), but it is still not clear how this will be done," the company official said.
It is Huawei's latest setback to acquire assets in the United States.
In 2008, its buyout attempt of 3Com with Bain Capital was rejected by the US government for "security reasons".
In 2010, Huawei was once again blocked from purchasing the mobile wireless network division of Motorola, as well as 2Wire, an American supplier of broadband Internet software.
The pullout was also a set back to the Chinese government as it has recently appealed to the US government to treat Chinese companies fairly.
The Chinese Commerce Ministry spokesperson Yao Jian said few days ago that Washington's attempts to block Chinese investments in the US had affected the bilateral co-operation.
He called on the US government to treat a Chinese company fairly, regardless of their status as state-owned or private.
Huawei, which initially faced security concerns in India regarding its telecom equipment later expanded its business in India after agreeing to comply with the regulations worked out by the Indian government.
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