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Entries in Huawei (40)


Huawei's brave new world

Huawei’s abandonment of the US market and the trimming of its enterprise sales forecast are the biggest news items out of its annual analyst event in Shenzhen Tuesday.

Yet in both case there is less than meets the eye.

Huawei is not going to win any major US network deals in the current Washington environment, so the remarks by executive VP Eric Xu merely reflect reality. And it certainly has a handset business there.

It might have cut the topline forecast for its new enterprise group, but it's still aiming for a hefty $10 billion in sales by 2017 – equivalent to three-quarters of ZTE’s total revenue last year.

For me, the biggest take-outs are twofold: Huawei’s diversification looks to be on track; but to succeed it has to go where almost no other B2B company has gone in creating a global brand.

On diversification: the enterprise business unit in its second year grew 26% in 2012 and has target growth of 45% this year. Assuming that growth remains profitable, the 2017 target looks achievable.

By that time the company hopes to reduce carrier equipment sales to just 60% of total revenue, compared with 73% last year, and increase handsets to 25% (22% for the past two years) and enterprise to 15% (5%).

On the brand: In a frank presentation, Shao Yang, Huawei's devices chief, said building the brand would be harder than developing the software and hardware. The Interbrand CEO told him there wasn't a single brand on the Interbrand 100 that was big in both B2B and B2C (IBM was the closest). And Huawei doesn’t have anything like Samsung’s $12.5 billion budget.

I’ll be posting more about Huawei here and at Light Reading in the next couple of days.


Aust PM hints door is still open for Huawei 

Just months after it declared Huawei a security threat, the Australian government now appears to be inviting the Chinese vendor back into the market.

Australian Prime Minister Julia Gillard has encouraged the company to "seek opportunities to grow its commercial business in Australia,” according to a Huawei account of her meeting with Huawei chairwoman Sun Yafang in Beijing on Tuesday.

In a press conference later, Gillard was less effusive, simply stating that Huawei was a major employer and had a substantial business in Australia.

But Gillard’s private meeting with Sun, at the end of a series of high-profile meetings with Chinese leaders, suggests the government has not closed the door on the Chinese firm, even though it has been ruled out of the NBN project.

Australia is significant because it is a junior partner in the US-led security alliance and is the only country other than the US to have blocked Huawei from major contracts on security grounds.

In Britain, the biggest US ally, Huawei is helping BT roll out its fibre network. A UK parliamentary committee review of Huawei, due to conclude by last Christmas, appears not to have made any adverse findings.

In another win for Huawei in a country close to the US, it yesterday was awarded Telecom NZ's major LTE contract, replacing 3G supplier Alcatel-Lucent.

A quick guide to s how Huawei stacks up among key agencies in the US and its allies:

FOR: White House, UK government, NZ government

AGAINST: US Congress, Pentagon, MI5, ASIO

UNDECIDED: Australian government, Canadian government.


Huawei brandishes its CSR credentials

Huawei was out selling its corporate social responsibility (CSR) programme this week. Cue eyes rolling in the Pentagon.

There's nothing unusual about CSR for western corporations, but among private sector Chinese companies it's still quite rare.

About 120 large Chinese firms have signed the UN Global Compact, which was set up in 2000 to encourage the corporate to adopt sustainable business practices. But almost all of them are state-owned, like China Mobile, ZTE, and oil companies Sinochem and CNOOC.

They’re probably following a state policy, but the UNGC is problematic for companies operating in China, both local and foreign. The first principle - to take one random example – is to “respect the protection of internationally-proclaimed human rights.” 

At a media lunch in Hong Kong, PR vice-president Scott Sykes said Huawei’s CSR was not about improving its image abroad but was “the right thing to do.” 

Still, most of Huawei’s CSR work is conducted outside China.The single biggest part, an ICT skills development scheme called Telecom Seeds, operates solely offshore, although CSR head Holy Ranaivozanany says the company is weighing whether to set it up at home.

Telecom Seeds is in 18 countries, mostly in the developing world, but will also be expanded to Japan, Spain and Australia in the coming year.

When it comes to supply chain management – the tricky area of labour standards that has caught up Apple, Samsung and others – Huawei audits all of its suppliers and, according to Ranaivozanany, has won a UN Global Compact award for best practice in the supply chain.

Ranaivozanany did disclose that Huawei sources as many components from the US as it does from China – 30%. Which presumably makes it as much a threat to Chinese national security as to the USA’s.

There's nothing special about Huawei's CSR programme, other than the fact it has one and is promoting it. 

For most people it's a Rorsach test. Those who believe Huawei is a PLA wormhole into the west's secrets will see it as a feint; those who think it's a company put-upon by protectionist scaremongerers likewise will see it as no different from any other CSR scheme.



Behind Huawei's handset numbers

Huawei made an eye-catching improvement in the handset rankings in the last quarter, but it has still fallen short of its own hefty expectations.

The Chinese firm ranked no. 3 in smartphones and no. 5 overall in IDC’s latest quarterly survey of mobile phone sales. It shipped 10.8m smartphones in the fourth quarter, 90% more than it sold in Q4 2011, and 15.8m phones in total, 13.7% higher.

But even though it improved full-year sales by 9.3% to $7.8 billion,  the consumer division still missed its full-year target of $9 billion. And it looks like it will struggle to meet the $15 billion sales goal for 2015 that the unit set last year.

Richard Yu, the head of Huawei’s consumer business, told Chinese business news site operating profit was up 40% but “we missed the target we set at the beginning of the year.”

And while Huawei's Ascend smartphone brand is getting traction, Yu’s team appears still focused on the ODM and operator white labal markets.

One un-named executive is quoted as saying “we need to clearly recognise that commercial success is the key, instead of illusory pursuit of the so-called ‘global brand.’”

For all this, let's bear in mind that Huawei only made the top end of the table in the final quarter of 2012. It ranks outside the top five in both smartphones and handsets for the full year. There's a lot riding on how it stacks up in this quarter.


Huawei up, ZTE down, NSN turns a corner

A busy day for vendors: Huawei expects a profit, ZTE a loss, and the bloom could be returning to Nokia Siemens.

Huawei has defied the tough telecom gear market to report expected 33% higher income of 15.4bn yuan ($2.48bn), with sales up 8% to 220.2bn yuan ($35bn).

It has forecast revenue to rise 10-12% in 2013.

The non-core divisions maintained their contributions. While the telco business accounted for 72.8% in sales (up 6.8% over 2011), the consumer division - which includes handsets and modems – made up 22.0% (up 9.3%) and the enterprise group 5.2% (up 25%).

Offshore sales accounted for 66% of total sales, down from 67.9% in 2011.

CFO Cathy Meng said the company had had kept general expenses under control, allowing it to “allocate more resources to bolster the front line and ensure continuous improvements on customer delivery and service quality.”

ZTE‘s expected loss wasn’t such a huge surprise, given its trying year, although investors still marked its stock down 1.63%.

ZTE said it expects a full-year loss of 2.5bn-2.9bn yuan ($379m-$439m). Operating revenue fell 18% in the last quarter and margin shrank by 11 points as a result of it chasing low-margin contracts in Africa, South America, Asia, and China.

As in previous quarters ZTE attributes the loss to an array of factors, “including postponed execution of systems contracts, decrease in revenue from terminals in the domestic market, and delayed progress of international projects.”

Meanwhile, Nokia Siemens is planning a bond issue in the next quarter – its first ever foray into the public finance markets, reports.

It aims to raise as much as €700m ($932m) with high-yield bonds to pay down bank debt and fund future investment, paper says.

The move is significant given the potential for a future flotation of the business, which has been recently rejuvenated by its parents. Nokia and Siemens talked to private equity groups about a sale of NSN last year but failed to strike a deal, forcing the groups to bolster its balance sheet with a further €1bn of equity.

Helped by that equity injection, steep cost cuts and asset sales, NSN has tallied “three consecutive quarters of underlying profitability for the first time in its history. That has led to renewed talk among financiers about a potential flotation or sale next year.”

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