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Huawei's US Aspirations on Hold

Light Reading
News Analysis
Light Reading
3/26/2004

Huawei Technologies Co. Ltd. appears to have put on hold plans for a private placement of shares in the U.S., judging by remarks that the company's chairwoman (or "chairlady" as Huawei puts it), Yafang Sun, made to Light Reading at its bash in London's Dorchester Hotel yesterday (see Huawei Gets BT's Blessing).

Yafang told Light Reading that there's no timetable for the private placement of shares, which is thought to be linked to Huawei's quest for a second U.S. partner to help the company establish a bigger presence among North American telecom operators (see Huawei on the Hunt).

Yafang also said there is no timetable for Huawei's planned IPO in the U.S. -- a carrot that the company occasionally dangles in front of its staff, who have a stock option scheme (see ...and East Looks West).

So far, Huawei's efforts to make a big name for itself in the U.S. haven't come to much. Huawei-3Com Co. Ltd., its joint venture with 3Com Corp. (Nasdaq: COMS) targeting the enterprise market, has got off to a slow start (see 3Com Feeling Cisco's Heat). And its U.S. subsidiary, Futurewei, has also had a bumpy ride since it was launched in 2002 (see Headcount: Outlawing Offshoring?).

In the past, Huawei has told Light Reading that its international expansion strategy is in three stages: developing countries, Western Europe, and North America. The idea is that success in one market leads to success in the next, because carriers often have interests that span more than one of these markets.

Remarks from BT Group plc (NYSE: BTY; London: BTA) -- praising Huawei for being so innovative and responsive -- suggest that stage two, gaining acceptance by European carriers, is going well. "We believe [Huawei] is moving up to be a world -class player in the market," Brian Levy, BT's technology officer, said yesterday. Levy told Light Reading that BT is also working with ZTE Corp., Huawei's closest rival in China. "The culture of these companies needs to be encouraged," Levy said. "We in BT want to play our part."

ZTE, by the way, is a public company listed on the Shenzhen stock exchange, unlike Huawei, which is privately owned (by its staff and founders, with founder Ren Zhengfei owning a 3 percent stake). ZTE also had aspirations of staging an "international" IPO, on the Hong Kong stock exchange, according to a press release it issued in August 2002 (see ZTE Plans IPO). The plan was scrapped in April 2003 "because of the worsening market conditions," says a ZTE press officer, Rena Qin. "ZTE has never stopped seeking international financing channels for its expanding overseas business," she writes in an email. But resurrecting the plan for an IPO hasn't been discussed.

— Peter Heywood, Founding Editor, Light Reading

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materialgirl
materialgirl
12/5/2012 | 2:10:16 AM
re: Huawei's US Aspirations on Hold
The facts in these stories do not add up. First of all, COMS was very clear in their conference call that routers from the Huawei joint venture were already targeted at service providers. The switches are targeted at the enterprise. Raising money to find a U.S. telecom partner implies they are unhappy with COMS.

COMS says that the JV generated $15M in revenues from mid-Nov. through Dec.31. They report one quarter in arrears, so we will not know March quarter revenues until June. They say that the pipeline is up 10x sequentially, with switches ramping earlier than routers due to a shorter sales cycle. This implies a much bigger number then. Perhaps it is too early to say the enterprise switch ramp is "slow." It is hard to break into a new market, and after dropping their old line, COMS does not have the greatest reputation there.

Also, a lunch does not a successful market make. Just because some BT brass made some comments, for who knows what reason, does not convince me that Huawei has "made it" in Western Europe. Show me the MONEY. Talk is cheap.
Peter Heywood
Peter Heywood
12/5/2012 | 2:09:53 AM
re: Huawei's US Aspirations on Hold
Point taken on it being too early to tell with the Huawei-3Com joint venture company as far as sales go.

However, I think you're wrong about the joint venture's focus, which is enterprise, not carrier. Read the news story we did when it was announced, entitled: 3Com Taps Huawei in Enterprise Battle

http://www.lightreading.com/do...

Or if you prefer, read the joint press release from the 2 companies:

http://www.lightreading.com/do...



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