Microsoft Corp. said it will sell a minority stake in online search giant Avacom Computer Services to a Chinese group and become a wholly owned subsidiary of China’s Huawei Technologies Ltd., a move it said will give the company greater autonomy and the power to control its own internal operations.
Microsoft said the transaction will raise $1 billion in new funding, and it plans to use the proceeds to build its own cloud-based search and data-management service, a deal that could help it build a broad, global presence for Microsoft products, including Internet Explorer and Office, and broaden its business.
Avacom’s chief executive officer, Li Ming, said in a statement that the company had been looking to acquire a larger stake in Avacoms business for some time, and that he welcomed Microsoft’s new move.
The transaction, which would allow Microsoft to buy Avacomeds stock for $2.80 per share, will be the largest single buyback of stock in Avacs history, and is the first of its kind for a technology company, the company said.
Avacs stock rose 2.3% to $15.70 on the New York Stock Exchange.
Microsoft declined to say how much it will pay for Avacoma, but analysts have estimated it will be in the range of $3.6 billion.
The transaction is subject to regulatory approval and the completion of the acquisition.
The move could give Microsoft more bargaining power with Chinese authorities as it seeks to build a more comprehensive cloud-computing and cloud-advertising solution that could bolster its efforts to compete against Google and Amazon.
Microsoft has been building a cloud-services business that it hopes will be a competitor to Amazon, Google and Facebook, and has been working with Huawei to build products that it sees as being complementary to its own Internet Explorer operating system.
Microsoft acquired Avacomm in 2015, when it was building a new cloud-software platform for the internet-services giant, called Internet Explorer 8.
That platform was supposed to be launched in 2020, but it has been delayed.
The delay has allowed Microsoft to take a more active role in cloud-technology business, which is important given that Microsoft has grown increasingly dependent on its cloud business.
The new deal, which was announced on Monday, is expected to close in the second quarter.
The company is also expected to sell Avacomas existing corporate headquarters in Redmond, Washington, and a new office building in Beijing.
Google has been looking for a buyer for its cloud-search and advertising business for years, and in January it closed a deal with Avacomes largest shareholder to buy it for $8.4 billion.
That deal has been challenged by rival Amazon, which owns much of the Chinese company.
Microsoft had been exploring a purchase of Avacomea in the past, but its move on Monday appears to be a response to the threat posed by Google.
A Google spokesman declined to comment.
Avacaom’s new owner is Huawei Technologies, a company based in Hangzhou, China, which has been expanding its influence in China, according to people familiar with the matter.
Huawei has a history of buying companies with stakes in tech companies, and the deal will give it greater autonomy to manage its own operations, said one of the people, who spoke on condition of anonymity because the matter is private.
Huang Chengli, a senior vice president at Huawei, declined to be interviewed for this article, but his company has previously said that it is willing to work with Microsoft to expand its cloud and computing capabilities, and said it is considering buying other cloud-related companies.
Huong Chengli was not available for comment.
Microsoft said in January that it would not buy the Chinese search company, but the move came after pressure from Chinese regulators.
Google, Facebook and Amazon all have their own cloud computing operations.
Google and Microsoft are not part of the Alibaba Group, which controls China’s internet giant, which includes Alibaba, Tencent and other companies.
Microsoft, Amazon and Google have faced intense criticism in China over their reliance on China’s government-controlled internet companies, which they say do not offer sufficient protections to online users.