Is Huawei in for a Bumpy 2017?
Whether either player can mount a more effective challenge to Huawei remains doubtful, of course. Google, Facebook or some other upstart seems the likelier threat. Nevertheless, service providers may be keen to prevent Huawei from becoming even more of a dominant force, which would risk the collapse of another infrastructure player, according to Bengt Nordström, the CEO of consulting firm Northstream. "That would have negative consequences for the operator community," he says.
Even before Xu published his New Year message, Northstream had predicted that market shares held by the three big vendors would stabilize this year -- following one in which Huawei appears to have further grown at the expense of Ericsson and Nokia -- and that pricing pressure would ease. "The ability of vendors to finance large break-in deals is very limited," says Nordström. "When I meet with Huawei, they are as worried as Ericsson and Nokia about price competition and how hard it is to make money from infrastructure."
All of this calls into question some of the forecasts that Huawei made last year. During an analyst summit in April, the vendor indicated that annual sales from its carrier and enterprise divisions could nearly double between 2015 and 2020, rising from about $41.4 billion to as much as $80 billion over that period. The implication, taking into account Ericsson's own forecasts at that time, was that Huawei's carrier business would be more than one and a half times the size of Ericsson's by the end of next year. (See Huawei's Carrier Division Set to Dwarf Ericsson by 2018.)
If the bare numbers now sound fanciful, then Huawei may still be on track to achieve them. A 32% increase would boost overall sales to nearly $75 billion, using current exchange rates. And if the carrier and enterprise divisions accounted for the same proportion of revenues as in 2015, they would together generate about $49 billion. To remain on course for $80 billion in 2020, Huawei would need to generate $47 billion in carrier and enterprise revenues in 2016, according to calculations previously carried out by Light Reading.
Xu may be concerned about some bumps in the road ahead, but it would take a big fall to really upset Huawei.
— Iain Morris, , News Editor, Light Reading