Home >companies >company-results >Huawei sees firmer revenue growth, 2012 profit up 33%

Huawei Technologies Co. Ltd , the world’s No.2 telecom equipment maker, bounced back from a disappointing 2011 with a 33% rise in net profit for 2012, and forecast stronger revenue growth, buoyed by smartphone sales and cloud computing.

Huawei chief financial officer Cathy Meng, the daughter of company founder Ren Zhengfei, also denied US security concerns would hamper the privately held company’s growth and said it would keep “an open mind" about a possible share market listing.

“Cloud computing is a huge sector in the next five years. In the telecom industry, we are expecting a 5 percent increase in capital investments. Smartphone penetration is still way too low and there is a lot of room for growth," Meng told a results presentation.

“So these three areas will create a lot of opportunities for us."

Huawei, which ranks only behind Sweden’s Ericsson in telecom equipment, reported an unaudited net profit of 15.4 billion yuan ($2.5 billion), up from 11.6 billion yuan in 2011, as new telecom projects and smartphones boosted sales.

Revenue for the year rose 8% to 220.2 billion yuan.

The results were in line with company guidance at the start of the year and came a day after rival ZTE Corp, China’s second-largest telecom equipment maker, warned of a net loss of up to 2.9 billion yuan ($467 million) for 2012.

“Huawei has a better long-term outlook (than ZTE) because it has telecom equipment, enterprise and handsets business," said Jessie Yu, an analyst with Frost & Sullivan, ahead of the results announcement.

“Its handsets are doing quite well and it has maintained its telecom equipment share. There is also some pickup in its enterprise business, so overall, its revenue channels are wider than ZTE."

Huawei is making gains in the enterprise business, which sells networking equipment such as routers and switches, and has up to now been dominated by Cisco Systems Inc.

Security concerns

Huawei, founded in 1987 by Ren, a former Chinese military officer, is known for aggressively gaining sales in the telecom equipment sector by edging out rivals such as Alcatel-Lucent SA, Nokia Siemens Networks and ZTE.

While Huawei has boosted sales and gained market share in Europe, Africa and Asia, it has also run into obstacles in countries including the United States and Australia due to national security and cyber espionage concerns.

The company has been barred from bidding for the rollout of a national broadband network in Australia, faces exclusion from Canada’s government network and is not allowed to sell telecom equipment to US carriers.

Huawei, which has repeatedly said it has no links with the Chinese government, said on Monday it did not believe US security concerns would have an impact on decisions by other countries to use its technology.

“We feel that security concerns in the United States are restricted within the country and that won’t have an impact on strategic decisions made by other countries," said Meng, who is also an executive director on Huawei’s Board.

“Over the past 20 years, we have not had any incidents based on security issues," she added.

Huawei has also diversified into the mobile devices area selling dongles, mobile phones and tablet PCs, aiming to tap the fast-growing sector and build its global brand name. The firm is the world’s sixth largest mobile phone vendor.

Asked about a potential sharemarket listing, Meng said: “We’ve always kept an open mind when it comes to the listing issue."

Analysts, however, believe an early listing would be difficult because of changes that would be required to the company’s ownership structure, which includes more 64,000 employee shareholders.

Shares in ZTE fell sharply at the start of trade in Hong Kong, but later retraced most of their losses to be down just 1% as investors focused on a strong outlook for 2013.

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