Huawei Reports 2008 Revenues of $18.3B

Huawei Technologies Co. Ltd. generated revenues of $18.33 billion in 2008, up 42.75 percent from 2007's $12.84 billion, according to the Chinese vendor's latest annual report, which includes previously unreported audited financial details.

That's the actual booked revenue figure for 2008, rather than the value of contracts signed, which is the number Huawei uses in its press releases. For example, Huawei says its contract sales totaled $23.3 billion in 2008: That puts 2008's ratio of actual revenues to contract sales at 78.5 percent, roughly in line with 2007.

That $18.33 billion figure makes Huawei the fifth largest telecom infrastructure supplier by revenues for the second year running, with only Cisco Systems Inc. (Nasdaq: CSCO), Ericsson AB (Nasdaq: ERIC), Alcatel-Lucent (NYSE: ALU), and Nokia Networks reporting higher 2008 numbers. That ranking could change this year, though, as Huawei looks set to leapfrog some of its fiercest rivals. (See Huawei Closes In on Rivals.)

According to the full year 2008 figures, which are audited by KPMG International "in accordance with IFRSs" (International Financial Reporting Standards), Huawei achieved a gross profit margin of 39.7 percent, slightly better than in 2007, and net income of $1.15 billion, a 20.3 percent improvement on the previous year. (Note: The vendor's 2007 numbers have been adjusted to include its mobile handset business, which wasn't included when Huawei issued its 2007 annual report.) (See Huawei Reports 2007 Revenues of $12.5B.)

Table 1: Huawei's 2008 Financials
In US$ millions 2008 2007*
Revenues $18,329 $12,840
Gross profit $7,269 $4,903
Gross margin 39.7% 38.2%
Operating profit $2,374 $1,248
Operating profit margin 13% 9.7%
Net financing cost** $971 $199
Net income $1,151 $957
* 2007 numbers adjusted to include handset business; those numbers weren't included in the 2007 annual report
** Foreign exchange loss plus other finance expenses
Source: Huawei

Table 2: Huawei's Contract Sales and Revenues, 2002-2008
Year Reported value of contract sales Reported audited revenues Audited revenues as % of reported contract sales
2008 $23.3 billion $18.3 billion 78.7%
2007 $16 billion $12.6 billion 78.5%
2006 $11 billion $8.5 billion 77%
2005 $8.2 billion $6 billion 73%
2004 $5.6 billion $3.8 billion 68%
2003 $3.8 billion $2.7 billion 71%
2002 $2.7 billion $2.1 billion 78%
Source: Huawei

Huawei's net income would have been higher if it weren't for a significant hit resulting from last year's currency exchange fluctuations: Of its total $971 million net financing cost, $776 million came from its "foreign exchange loss," compared with $30.7 million in 2007, while "other finance expenses" accounted for the remaining $195 million.

Unrivaled growth
The vendor's growth during the past few years has been dramatic. As the table below shows, its 2008 revenues are more than double its 2006 revenues and more than treble its 2005 revenues.

Table 3: Key Huawei Financials, 2001-2008
Years ended December 31
(in US$ millions)
2008 2007* 2006 2005 2004 2003 2002 2001
Revenues $18,329 $12,840 $8,504 $5,982 $3,827 $2,694 $2,128 $2,290
Net income $1,151 $957 $512 $681 $624 $384 $108 $258
Cashflow from operations $946 $1,044 $743 $708 $396 $385 $204 $255
Operating profit margin 13% 10% 7% 14% 18% 19% 17% 24%
* 2007 numbers adjusted to include handset business: those numbers weren't included in the 2007 annual report
Source: Huawei

And that growth is set to continue this year, if Huawei's forecasts are accurate. Despite the economic downturn, the Chinese company said in January that it expects the value of contracts signed this year to reach $30 billion, and if it can maintain its revenue-to-contract-sales ratio of nearly 79 percent, that would translate into revenues of $23.7 billion. (See Huawei Predicts 29% Growth in 2009.)

Here are some other details of interest from Huawei's annual report:

  • Huawei's customer base includes 36 of the world's top 50 telecom operators. In addition, its development teams work closely with a number of major carriers, including China Mobile Ltd. (NYSE: CHL), Deutsche Telekom AG (NYSE: DT), Telecom Italia (TIM) , Telefónica SA (NYSE: TEF), and Vodafone Group plc (NYSE: VOD). (See Huawei's SDP Coup, Huawei Opens Italian Center, and Vodafone, Huawei Team.)

  • The company stressed its developments in a number of technology areas, including LTE (Long-Term Evolution), core routers, and GPON, among others. (See Huawei Bites at the IP Core, Huawei Raises the Optical Stakes, Huawei Unifies LTE, Huawei Joins Vodafone LTE Trial, Huawei Wins LTE Deal, and TeliaSonera: We'll Do 4G in 2010.)

  • Huawei says it is involved in 45 managed services contracts, and that its managed services "sales" (value of contracts awarded) increased by 67 percent year-on-year. It didn't provide any dollar numbers, though, likely because the amount is still quite low: "Professional services" is an area where Huawei has a lot of catching up to do on the likes of Alcatel-Lucent, Ericsson, and Nokia Siemens. (See Huawei Wins Mobily Deal.)

  • It filed 1,737 patent applications in 2008.

  • International business accounted for 75 percent of the value of contract sales last year.

  • Of Huawei's 86,000 global employees, more than 37,000 work in its 14 R&D institutes. The company says it invests a minimum of 10 percent of annual revenues in R&D -- that would amount to more than $1.8 billion in 2008.

  • Huawei claims to have deployed 34 commercial WiMax networks in 2008.

    — Ray Le Maistre, International News Editor, Light Reading

  • HOME
    Sign In