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Cloud Strategies

Huawei's Carrier/Enterprise Sales Could Hit $80B by 2020

SHENZHEN, China -- Huawei Global Analyst Summit 2016 -- Huawei sent a very clear warning signal to its main rivals in the telecom networks infrastructure market Monday with a bullish prediction of further growth in the coming five years.

Huawei Technologies Co. Ltd. has already overtaken Ericsson AB (Nasdaq: ERIC) as the number one supplier (by sales) of technology and related services to the communications service provider (CSP) market, having reported a 21.4% year-on-year increase in revenues for its Carrier Business Group in 2015 to 232.3 billion yuan (US$35.92 billion). It also reported revenues of RMB27.6 billion ($4.27 billion) for its Enterprise Business Group, up 43.8% compared with 2014. (See Huawei: New King of the CSP Market.)

Now Eric Xu, one of the company's rotating CEOs, has told analysts and media at its annual summit that further dramatic growth is expected in the coming years. Responding to questions following a presentation about the company's product and business strategy, Xu said he expects the B2B business (combined Carrier and Enterprise groups) to generate revenues of up to $80 billion by 2020, double 2015's total.

He also noted that the Enterprise business, which went into the black for the first time in 2015, is on course to generate sales of about $10 billion by 2019.

Even if the Enterprise business grew further to, say, $12 billion by 2020, that would still put the Carrier group's revenues at up to, or in the region of, $70 billion, about double 2015's number.

All of this, of course, is based on Huawei having an accurate insight into how its business might grow in the coming years: The worrying news for Huawei's rivals such as Cisco Systems Inc. (Nasdaq: CSCO), Ericsson, Nokia Corp. (NYSE: NOK) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), though, is that the Chinese vendor is often quite conservative with its growth estimates.

Spending power
So where might these additional revenues come from? There are expectations that the total global spend by the world's CSPs will increase in the coming years, but only slightly: Capex spending by telecom operators is expected to grow from about $350 billion in 2015 to just $360 billion in 2020, according to Heavy Reading .

Additional communications network investments by the new breed of webscale/OTT service providers will generate some new business, but general consensus suggests the impact of this will be limited, boosting the total global addressable market for the network infrastructure vendors by a small single-digit percentage in the coming few years.

Huawei believes it can claw market share from its rivals by focusing on the cloud infrastructure needs of the CSPs.

In his presentation, Xu stated that "cloudification" is the key to the revival of the telecom industry. He said the industry needed to "fundamentally reinvent itself" in order to avoid being swept away by OTT players. (See Huawei Unveils Its 'All Cloud' Strategy.)

"In the last ten years, it has been all IP. In the next ten years, it is going to be all cloud," he stated.

Xu said the industry was under siege from dissatisfied consumers, enterprise customers and governments, while OTT players such as Facebook and Google were introducing and developing new technologies to disrupt the industry.

To meet the needs of the CSPs, Xu said Huawei would "cloudify" all of its products and services in the next two years.


For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.


Not everyone was that impressed. Peter Jarich, a vice president at Current Analysis , pointed out that this is not the first cloud-centric pitch to the industry. He added that operators were still grappling with issues around NFV -- taking on the all-cloud transformation would mean another "mindset change."

The path to the "cloudified" future wasn't clear either, he added: It could be a task that professional services teams could tackle, but Huawei's strategy didn't make any mention of its services team, noted Jarich.

Huawei's global influence is growing stronger each year and not only in the Carrier and Enterprise sector: Its Consumer unit, which develops and sells mobile phones and other end user devices, has experienced dramatic growth also in recent years, generating revenues of more than $19 billion in 2015 and achieving its goal of being the number one brand in China, noted Xu.

The company is also managing to increase its margins as it grows its sales. Huawei reported a 32% hike in 2015 full-year profits to $5.69 billion. (See Huawei Profits Soar Despite Forex Hit.)

— Robert Clark, contributing editor, and Ray Le Maistre, Editor-in-Chief, Light Reading

Vishnu Goel 4/14/2016 | 9:24:56 PM
Product,Service and Productised Service is part of Corporate Evolution! There seems to be one way growth journey for Huawei and which is good for overall NEM business Globally.No organisation can afford to be a pure play box player for long.Virtualisation,Disruption or disappearance of the industry can occur.It is to be appreciated that after Samsung,another star from Asia will potentially cross 100B$ top line! Vishnu Goel T&M+919810101238
SeniorKe73731 4/11/2016 | 2:53:44 PM
Where will the growth come from? As an ex-Huawei employee, and a long-term industry veteran, I don't see that Huawei's growth predictions to 2020 are that un-achievable. A very substantial chunk of Huawei's revenues in CSP (and indeed most players in the Telco Infr space) comes from Radio Access (RAN) - rolling out lots and lots of base stations.

In all likelihood, Huawei is basing their number on 5G deployments, and the massive demand for cell-site infrastructure.

Remember - this is a company that is very good at shipping boxes in volumes. This is all they're interested in, and how their Executives are measured.

The Cloud thing is very new to them.
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