The withdrawal and lack of approval by the Committee on Foreign Investment in the United States (CFIUS) marks a huge obstacle to the deal's closing. But the companies said they were still in discussions

Bain agreed in September to buy 3Com in a deal that would also give China's Huawei Technologies a 16.5 percent minority stake. Huawei could increase its stake in 3Com by up to an additional 5 percent.

The deal was subject to scrutiny by CFIUS, an inter-agency U.S. governmental panel that reviews corporate acquisitions involving foreign buyers.

"We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction," said 3Com President Edgar Masri.

"While we work closely with Bain Capital Partners and Huawei to construct alternatives that would address CFIUS' concerns, we will continue to execute our strategy to build a global networking leader," 3Com said.

In October, eight U.S. lawmakers were backing a bill suggesting that the planned buyout 3Com "threatens the national security of the United States."

3Com previously said Huawei would not have access to sensitive U.S. technology or U.S. government sales and that it would lack operational control or the ability to make decisions for the firm.

Last week, Bain offered to divest 3Com's Tipping Point unit, which makes national security software, a source familiar with the situation said.

Last year, 3Com had planned to spinoff Tipping Point through an initial public offering, but that idea was scrapped when Bain agreed to buy Marlborough, Massachusetts-based 3Com.

Tipping Point makes "intrusion prevention" systems to protect networks at large businesses and government agencies. 3Com acquired Tipping Point in late 2004 for $430 million.