& cplSiteName &

Huawei Expects Dip in Networks Contribution

Robert Clark
News Analysis
Robert Clark
4/25/2014
50%
50%

Huawei's current acting CEO Eric Xu certainly knows how to put on a show. The two top takeaways from this year's Huawei annual analyst summit, held in Shenzhen this week, are: while other vendors are struggling, the Chinese firm is in the sweet spot; and Xu has staying power.

Let's take Xu's performance first. He held forth candidly for close to two hours on everything from the CEO succession and politics, to open source and R&D investment. He doesn't hold back, labeling the constant questioning about the Snowden leaks as "tiresome," and warning that Huawei's devices unit had to come "down to earth." (See Huawei Boss Tells Handset Team to Sober Up.)

But he has reason to be ebullient. Huawei Technologies Co. Ltd. is hitting its numbers, and its diversification strategy appears well on track. All units posted growth in 2013 as it clocked up 239 billion Yuan Renminbi (US$38.3 billion) in revenues. (See Huawei Pumps Up Its Profits to $3.5B.)

It has achieved a CAGR of 13% during the past five years, and believes it can maintain that over the next five to become a $70 billion-a-year company.

Over that time, the vendor expects the contribution from its traditional network equipment business to decline in favor of services, enterprise, and devices.

Xu said the carrier network division, now accounting for 70% of sales, could decline to as low as 50%. Within that group, services -- currently the second-largest segment -- will almost certainly overtake wireless networks to become the biggest single revenue source in its core business.

The services segment, which grew 22% last year and is forecast to hit 17% this year, is tracking in the path of other global vendors, some of which earn more from services than selling network gear, Xu said.

Huawei is also expecting its three-year-old enterprise group, now generating annual revenues worth around $2.5 billion, to become a $10 billion business by 2018. Its handset group is already the number three worldwide in smartphones and represents nearly a quarter of the company’s business.

What ties these together is the company's "pipe strategy," or anything that drives network bandwidth. "Where there is data flow, that is our business," said Xu. "We will not touch content and applications."

He and other execs repeatedly struck two themes the company has identified as growth drivers.

The first is connecting the two-thirds of the world that aren't yet online, which plays to Huawei's strengths in networks, devices and emerging markets.

The second is enabling the coming "IT transformation" of business and consumer behavior. "With the increasing penetration of the Internet, IT is actually reshaping different industry verticals and our society," said Xu.

In telecom, for example, that means reforming BSS to deliver a better experience. It also refers to technologies such as SDN, which Xu believes can substantially improve O&M in mobile backhaul and large backbone networks.

Other technologies attracting Huawei's attention right now are multi-carrier access, 400GE core routers, and fixed access copper networks.

During the next decade, Huawei's headline R&D focus will be 5G, for which the firm has already set aside $600 million for initial R&D. Xu thinks 5G networks and terminals could be available as early as 2020. (See Huawei CEO Pledges 5G R&D Investment.)

But the one area where Huawei is easing back is in building a global brand to support its handset business."When it comes to branding we will take a different path from other companies," Xu said. "We won’t spend a lot on campaigns. We will trust in word of mouth."

— Robert Clark, contributing editor, special to Light Reading

(13)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
R Clark
50%
50%
R Clark,
User Rank: Blogger
4/25/2014 | 11:37:21 PM
Re: Something missing?
Stat from Huawei: 77% of revenue last year came from among the world's top 50 carriers, up from 75.2% in 2012.  The major operators clearly have confidence in Huawei.
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
4/25/2014 | 8:28:05 PM
Re: Something missing?
I think all they'd need is a carefully crafted marketing plan to approach the US to have a chance at some success. Then build on it little by little.
-0
50%
50%
-0,
User Rank: Light Beer
4/25/2014 | 6:39:01 PM
Re: Something missing?
Frankly, I do not see what Huawei may do to improve its perception in the West (read - in US). It's not as much distrust of the company, it is distrust to the country where company is headquarterd (plus a lot of protectionism of domestic vendors). Thus Huawei's current strategy of concentrating on countries without protectionism barriers makes a lot of sense.

Trust is not something one can manufacture or buy, it's product of a time, a loong time. Being financially successful is a good step in building trust too.

 
allthingsCom
50%
50%
allthingsCom,
User Rank: Light Beer
4/25/2014 | 4:28:57 PM
Re: Something missing?
Curently, majority of the world also doesn't completely trust the US .. I am sure that will work out in one way or another as well. US is less of a metric for decisions at a global scale than it used to be. Several examples are abound in current geo-political news. Events in BRIC regions definitely attest to that..
thebulk
50%
50%
thebulk,
User Rank: Light Sabre
4/25/2014 | 2:55:47 PM
Re: Something missing?
@melao2, 

I am just going off of reports and conversations I have had with other network engineers in those areas. From what I have been told most of them are very sheepish on putting Huawei equipment in their networks and many companies do not consider them when taking bids. 
melao2
50%
50%
melao2,
User Rank: Light Sabre
4/25/2014 | 2:35:30 PM
Re: Something missing?
I may be wrong, but West Europe experienced their biggest growth in 2013 for overseas.

It is in their annual report. Of course one can question those numbers, but that's an entirely different story. 

 
thebulk
50%
50%
thebulk,
User Rank: Light Sabre
4/25/2014 | 2:07:48 PM
Re: Something missing?
My understanding is that they have been pretty much black listed in Australia and New Zeland and they are having a hard time doing business in France, Germany and the UK. Since the vast majority of the internet infrastructor is in the US, it may very well come down to a point that anyone who wants to do business with the US has to be Huawei free, not likely, but still a possibility. 
melao2
50%
50%
melao2,
User Rank: Light Sabre
4/25/2014 | 1:56:54 PM
Re: Something missing?
Hi, which developed world do you think that Huawei does not have access?

Honestly it is only the US. All of the others they already have a strong presence, and moreover, their biggest overseas accounts are from European carriers that have global presence such as TI, Vodafone and Telefonica.
thebulk
100%
0%
thebulk,
User Rank: Light Sabre
4/25/2014 | 12:14:07 PM
Re: Something missing?
Thailand has strong ties to the US so it might not be the litmus test for this. I would say keep an eye on countries like Myanmar (Burma), Vietnam and Lao those will be better indicators IMO I know Huawei has heavy market share in those countries. 
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/25/2014 | 12:00:30 PM
Re: Something missing?
That's something definitely worth watching -- Huawei's market share in regions where it's the de facto incumbent. Thanks for pointing that out.
Page 1 / 2   >   >>
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
CommScope – Meeting the Demands of Tomorrow's Networks

3|24|17   |     |   (0) comments


Phil Sorksy, Vice President International at CommScope, discusses addressing the challenges faced by service providers today, and as future trends emerge.
LRTV Huawei Video Resource Center
AMS-IX & Huawei's OSN 902

3|24|17   |     |   (0) comments


Huawei shows how its OSN 902 platform helps the Amsterdam Internet exchange to connect the world using multiplexing.
LRTV Huawei Video Resource Center
Huawei's Smart Energy Innovation Center

3|24|17   |     |   (0) comments


In Nuremberg, Huawei showcases its latest capabilities in the digitalization of Internet resources, network infrastructure and intelligence at its Smart Energy Innovation Center.
Valley Wonk
OFC & Hyperscale: A Good Mix?

3|24|17   |   01:50   |   (0) comments


Cloud and telecom players want different types of equipment for their networks, as the chatter at OFC reveals.
LRTV Custom TV
Etisalat on NFV Journey

3|24|17   |   10:37   |   (0) comments


Etisalat is a service provider that prides itself on bringing innovative technologies to the markets it serves. It was one of the first operators to implement 3G and leads the pack in fiber penetration. Now, Esmaeel Al Hammadi, Etisalat's SVP of Network Development, explains the operator's journey to virtualization, beginning with the network core, as well as the ...
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 3

3|22|17   |     |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting on the application of technologies and key business verticals such as transportation, smart city, manufacturing, media and finance.
LRTV Documentaries
No Regrets: Cox's Finkelstein on Fiber & More

3|22|17   |     |   (0) comments


At the Cable Next-Gen Technologies & Strategies event in Denver, Cox's Jeff Finkelstein examines the cable capex conundrum.
LRTV Documentaries
Cable Next-Gen: The 'Mile High' View From Denver

3|22|17   |   11:56   |   (0) comments


Alan Breznick kicks off the Cable Next-Gen Technologies & Strategies event in Denver, casting his thousand-yard stare over cable's current competitive landscape.
LRTV Huawei Video Resource Center
Huawei at CeBIT 2017: Day 2

3|21|17   |   2:27   |   (0) comments


Light Reading reports from CeBIT 2017 in Germany, where Huawei is exhibiting digital transformation solutions around IoT, smart data centers, OpenCloud ecosystem and its newly announced storage-as-a-service solution.
LRTV Custom TV
Driving Better Mobile Customer Experience While Transforming the Mobile Network

3|21|17   |   7:47   |   (0) comments


The Citrix NetScaler mobile gateway is an intelligent traffic management solution which can markedly improve the customer experience provided by mobile operators, even when traffic is encrypted. Critical network services can be consolidated and virtualized using NetScaler. Because of the unique architecture, NetScaler can be deployed on any hypervisor, on a ...
LRTV Custom TV
Mastercard: What's Next for Mobile Payments?

3|21|17   |   7:49   |   (0) comments


2017 marks the fifth consecutive year for Mastercard at Mobile World Congress and it was a great time to reflect on the amazing advances the payments industry has made as well as discuss "What's Next' in the digital commerce future. We spoke to James Anderson, executive vice president of digital payments at MasterCard, about digital wallets to tokenization to ...
LRTV Custom TV
Mastercard: 2 Billion Adults 'Trapped' in Cash Economy

3|21|17   |   03:51   |   (1) comment


Despite advances made in the last several years, two billion adults around the world are trapped in a cash economy and lack what we take for granted -- a safe way to receive, save and use money. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, chats about how Mastercard is developing new ways to ...
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
High-Band 5G: Let's Address the Range Question, Shall We?
Dan Jones, Mobile Editor, 3/21/2017
Eurobites: A1, Nokia Turn It Up to 11
Paul Rainford, Assistant Editor, Europe, 3/22/2017
FTTH No Slam Dunk for Cable
Carol Wilson, Editor-at-large, 3/23/2017
Top Priorities for B/OSS Transformation
James Crawshaw, Senior Analyst – OSS/BSS Transformation, Heavy Reading, 3/20/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
At MWC 2017, Qualcomm's CTO Matt Grob talks to Light Reading's CEO and Founder Steve Saunders about the progress being made in the development of the technologies and standards that will underpin 5G.
Animals with Phones
Neither Do We Click Here
Is that a prerequisite?
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.