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Huawei Predicts 29% Growth in 2009

Chinese telecom equipment vendor Huawei Technologies Co. Ltd. believes its business will grow by almost 29 percent during 2009, just as its major rivals prepare themselves for a year of shrinking sales. (See Nokia Siemens Braced for Tough 2009 and AlcaLu's New Vision: More Convergence.)

Light Reading reported in December that Huawei and fellow Chinese vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) were expecting to grow during the coming year, but neither company had stated the level of growth they were anticipating. (See Huawei, ZTE Predict 2009 Growth.)

Now Huawei has confirmed that the value of contract sales in 2008 was $23.3 billion and that it is expecting contract sales to reach $30 billion in value this year, an increase of 28.8 percent.

The figures were first reported by Chinese media outlets such as China Daily, which cited an internal email sent to Huawei's employees by the vendor's chairwoman Sun Yafang.

The reports also noted that of the $23.3 billion in contract sales in 2008, overseas markets generated 75 percent, or nearly $17.5 billion.

In 2007, Huawei's contract sales totaled $16 billion, of which 72 percent, or $11.5 billion, came from outside China. (See Huawei Sets Bumper Sales Target.)

It's possible that the proportion of Huawei's domestic contract sales could increase in 2009 as China's three major operators start to roll out their 3G networks following the award today of their respective licenses. (See China Awards 3G Licenses and China's 3G Move to Trigger Spending.)

However, the vendor is still very keen to establish itself as a major supplier to, and partner of, the major Tier 1 carriers in Europe and North America as they continue their migration to next-generation, IP-based fixed and mobile infrastructures. Huawei is already supplying network equipment to a number of European incumbent operators, including BT Group plc (NYSE: BT; London: BTA), Telecom Italia (TIM) , and Telefónica SA (NYSE: TEF), among others, and is renewing its efforts to break into the extensive North American market. (See Telefónica Deploys Huawei DWDM, TI Uses Huawei for NGN, BT Goes With Huawei for FTTH , Huawei Gains Optical Ground in North America, and Is Huawei Moving Closer to Nortel?)

In addition, emerging overseas markets such as India, Russia, and Brazil also offer significant prospects during 2009. (See Emerging Markets Offer Capex Hope.)

Contract sales differ from reported revenues
Of course, contract sales (the value of contracts signed with customers) are not the same as reported revenues: Over the years, Huawei's audited revenues usually come in at around 75 percent of contract sales. (See Huawei Reports 2007 Revenues of $12.5B.)

That percentage would put Huawei's actual 2008 revenues at about $17.5 billion. And if Huawei achieves its 2009 contract sales target, its revenues could conceivably come in at around $22.5 billion, a figure that could make it among the top three telecom equipment vendors globally.

While Huawei confirmed to Light Reading that the reports of the contract sales figures were accurate, it disputed claims that it is planning to transfer 15 percent of the headquarters staff to overseas locations, and cut staffing levels at its main Shenzhen site by about 5 percent.

In an emailed statement, a company spokeswoman said that "claims related to staffing movements are inaccurate. Huawei currently does not have any workforce reduction plans. Hiring and campus recruitment activities are operating as usual."

At the end of June 2008, Huawei had 87,500 staff globally.

— Ray Le Maistre, International News Editor, Light Reading

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ninjaturtle 12/5/2012 | 4:14:51 PM
re: Huawei Predicts 29% Growth in 2009 Hey I realise it is a competitive world out there but I hope US Goverment officals maintain some pressure on China's imports from North America's suppliers. If not for America the growth rate that has been acheived in China would disappear and they know it. I hope Huawei is not the sole source choice within China's growing Telecommunications build out. Free trade is good but sole sourcing is unfair free trading practices in my book.
Soupafly 12/5/2012 | 4:14:51 PM
re: Huawei Predicts 29% Growth in 2009 Its interesting that Huawei has been able to maintain its momentum. That says as much about its staff and their hunger and motivation as it does about the lazy and disappointing muppets working for the "traditional" incumbent players.
Can the chinese continue to work their "miracle"? Unless the other vendors get there act together I think the answer has to be yes and the consequences of the miracle could be felt in a more profound and ruthless way than we have seen to-date.
digits 12/5/2012 | 4:14:49 PM
re: Huawei Predicts 29% Growth in 2009 The Chinese carriers don't go for sole sourcing generally, especially in mobile -- Alcatel-Lucent, Ericsson, Motorola, Nokia-Siemens, Nortel, and others have all historically won business there as well as Huawei and ZTE, and will likely do so in the 3G rounds.

BUT -- I would say it's likely that Huawei and ZTE will do well, and maybe win the lion's share of the business, but that's a guess.

As for Huawei's outlook - yes, it's just a prediction at the moment, but their predictions have matched their end of year numbers quite closely so far.

Whether you want to question their end of year numbers is another matter... and remember, the $30 billion number is not revenues, it's the value of contracts signed.

Ray
bollocks187 12/5/2012 | 4:14:48 PM
re: Huawei Predicts 29% Growth in 2009 Ray,

Not true, Chinese do go for reduce vendors - national Chinese vendors. They only reason the western compnaies are there is beciuase they developed the technology first. Hu and ZTE will ge teh lines share as they have caught up to the western.

The chinese have the best products and lowest prices by far.
Sterling Perrin 12/5/2012 | 4:14:48 PM
re: Huawei Predicts 29% Growth in 2009 In optical networking, reliance on Huawei and ZTE has been sufficient for building multi-vendor networks in China. The Western vendors were pushed out of China early in this decade and, in my view, have largely given up on the Chinese market (I'm only refering to optical, not sure about other areas.

I'm curious if anyone feels this has changed. But I am not aware of any Western optical vendors targeting China for growth. Most seem to have flocked to India instead, which does not pose the same homegrown vendor challenge as China.

Sterling
Light-bulb 12/5/2012 | 4:14:47 PM
re: Huawei Predicts 29% Growth in 2009 Woa Woa Woa, Bollocks...

Best products? Are you being serious or is there /sarc here?

I certainly hope you are not serious. Granted your statement is opinion, but how would you back your opinion by any facts that are that broad? Again I have to go back to...

1.) Where is the Technology leadership in Chinese Vendors?
2.) WRT quality and code churn how does Chinese products compare to the big 3 US vendors for Carrier Grade equipment?
3.) Are companies so focused on low cost that they ignore the rest?

... hmm
Creagh 12/5/2012 | 4:14:45 PM
re: Huawei Predicts 29% Growth in 2009 Folks I think this is very impressive...one wonders will it take a nest gen. company at this stage like Intune Networks in Ireland, of course not to exclude cisco, that will be capable of competing with these guys in years to come.
bollocks187 12/5/2012 | 4:14:44 PM
re: Huawei Predicts 29% Growth in 2009
1) Sarc.
2) Copying but eventually Chinese-USA will return to help China innovator
3) actually compares quite well as they use lower technology solutions versus highly integrated ones.
4) yes very much so low cost and ignore the rest. If you make something so cheap the cost of replacement is not an issue e.e. ADSL so so very cheap.
Stefan Sip 12/5/2012 | 4:14:42 PM
re: Huawei Predicts 29% Growth in 2009 Perhaps I am smoking something early here on Friday afternoon in Europe, but the Huawei board often talks about Huawei being a government front, now stories are coming out about how employees are asked to pitch in to raise funds to buy Nortel and/or other activities. Huawei and its attitude toward IPR, now that Huawei is a top 5 patent filer, it is clear Huawei is innovating on its own. Now people are bringing up quality issues. When was the last time you have heard about bad quality Huawei products? In all their cap/grow or rip/replace wins, Huawei has demonstrated other attributes other than price alone. So I would think quality would be one of them.

Lastly, we can talk about Huawei for another 2 years while their revenue will double again. Forecasting 29% growth for '09 is very ambitious, but even if they do half of that, it would still be an impressive year, given the state of the industry and economy.
paolo.franzoi 12/5/2012 | 4:14:40 PM
re: Huawei Predicts 29% Growth in 2009
Who are these big 3 US vendors? I count 1 - Cisco.

seven
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