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Telecom equipment giant Huawei to beat Ericsson

China Daily, January 22, 2013

• Huawei Technologies Co Ltd is poised to become the world's biggest telecom equipment maker by revenue, beating Sweden's Ericsson AB.

  The Chinese company expects its 2012 sales to rise 8 percent year-on-year to reach 220 billion yuan ($35.4 billion).

  Ericsson is scheduled to report its earnings at the end of the month. However, analyst estimates compiled by Bloomberg News suggest that it will likely post 2012 sales of 226.9 billion Swedish kroner ($34.8 billion), little changed from 2011 figures.

  Huawei beat Ericsson for the first time in July 2012. The company reported that month that its first-half revenue was $16.1 billion, about $850 million more than Ericsson's first-half sales.

  Cathy Meng, chief financial officer of Huawei, said at a news conference in Beijing on Monday that the company expects its net income to climb 33 percent to 15.4 billion yuan in 2012.

  "Huawei achieved effective growth in 2012 by focusing on customers, streamlining management and improving efficiency," Meng said.

  She added that Huawei expects its overall revenue to grow between 10 percent and 12 percent in 2013.

  The event was the first media briefing for Meng, 40, the daughter of Huawei founder Ren Zhengfei.

  She said Huawei's three business groups — the carrier network business, consumer business and enterprise business — achieved performance in line with expectations.

  The carrier network unit recorded sales of 160.3 billion yuan last year. Sales for the consumer business unit reached 48.4 billion yuan, and sales for the enterprise business unit were 11.5 billion yuan, Meng said.

  "The troubled economies of Europe and North America curbed telecommunications spending, which had a negative impact on Ericsson's performance," said Ji Chendong, a telecom analyst at KPMG.

  Meanwhile, Huawei expanded to new areas such as mobile phone manufacturing and enterprise IT solutions.

  In contrast, Ericsson tried to focus on the telecom network business and exited from a mobile phone joint venture with Sony Corp, Ji said.

  "In the traditional wireless network equipment business sector, Ericsson remains the world's No 1, without doubt," said Zhao Hailin, an analyst at IHS iSuppli, a United States-based research company.

  Huawei met tough resistance in markets such as the US on "national security" concerns, but Ericsson saw no such barriers and managed to grab a large piece of the market there, Zhao said.

  Despite lackluster penetration of the US network market, Meng said that 66 percent of Huawei's revenue came from outside China.

  About 70 percent of Huawei's revenue was generated from businesses with leading telecom operators, including 45 of the world's top 50 companies in that field, Meng added.

  Meng also said that Huawei has an "open mind" about a stock market listing.

  "No matter whether we go public or not, we will always honor our commitment to openness and transparency. We will refer to the standards of listed companies to improve ourselves," she said.

  Analysts said that Huawei is still a long way from a public listing.

  "For Huawei, which has rich channels to raise capital, the momentum to apply for an IPO is not that strong," Zhao with iSuppli said.

  "However, like the regular earnings disclosure, a public offering is a necessary step for privately owed Huawei to show transparency," Ji said.

  Huawei is employee-owned, with about 65,000 staff members holding shares, Meng said. Her father Ren Zhengfei controls about 1.4 percent of the company, she said.

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