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Financial

Huawei Snatches Ericsson's Crown

Huawei Technologies Co. Ltd. can now lay claim to being the world's leading supplier of telecom hardware and software, following the publication of its sales for the first half of this year. (See Huawei Increases H1 Sales by 4.5%.)

There are no doubt a number of variables that make the comparisons slightly uneven -- particularly the breadth of portfolios (Huawei has made a big push in the enterprise technology and mobile devices sectors in the past year) and the impact of currency exchange rates. But at a basic level, and using the U.S. dollar as the unifying global currency, the Chinese vendor is now bigger than Ericsson AB (Nasdaq: ERIC).

While, at current exchange rates, Huawei's reported revenues for the first six months of 2012 total US$16.1 billion, Ericsson's come in at $15.25 billion (106.3 billion Swedish kronor). (See Ericsson Sets Q2 Benchmark.)

Nokia Networks , with first-half revenues of $8 billion (€6.59 billion) is some way off the pace, and Alcatel-Lucent (NYSE: ALU) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), which haven't yet reported their second-quarter sales, will not be troubling the leading duo. (See Restructuring Costs Hit NSN's Q2.)

Table 1: Vendor Ranking by H1 2012 Revenues (in US$)
Ranking by H1 2012 revenues Vendor H1 revenues in US$
1 Huawei 16.1 billion
2 Ericsson 15.25 billion
3 Alcatel-Lucent 8.13 billion (estimate)
4 Nokia Siemens Networks 8 billion
5 ZTE More than 5.8 billion




AlcaLu reported first-quarter revenues of €3.2 billion ($3.9 billion) and is expected to report sales of around €3.5 billion ($4.23 billion) for the second quarter when it reports its latest earnings on July 26. (See AlcaLu Issues Full-Year Profit Warning and Bad Start to 2012 for AlcaLu.)

ZTE stated recently that its revenues for the first six months of 2012 will be greater than the RMB 37 billion ($5.8 billion) it recorded a year ago.

— Ray Le Maistre, International Managing Editor, Light Reading

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singhpp 12/5/2012 | 5:26:42 PM
re: Huawei Snatches Ericsson's Crown

What seems to be the problem? There is still a lot to copy.

jepovic 12/5/2012 | 5:26:42 PM
re: Huawei Snatches Ericsson's Crown

Amazing that there are no North American vendors in top 5.


Ericsson has played their hand well. Lucent and Nortel, not so well. Already in 2006 or so, CEO Svanberg claimed that he saw the Chinese vendors as their biggest threat. Instead of whining, his response was to solidify the no 1 position through acquisitions.


Now it's a textbook market straight out of Porter: A no 1 supplier with a size and brand name which allows it to charge premium prices. A cost leader. Lots of niche suppliers. And, of course, the "stuck in the middle" cases which are struggling.


It's not about subsidies, it's about the quality of the management. Apple is flourishing despite chinese competion. Lucent and Nortel were mismanaged for many years before Huwaei came along.

PT_TRUE 12/5/2012 | 5:26:40 PM
re: Huawei Snatches Ericsson's Crown Well it's clear that Huawei can post such figures, but are they also declaring the amount of money they have received from the Chineese government funding? If the can claim No 1 position, then are they also claiming or declaring the technology that they may have copied to get to that position also? We live in a very strange world were values and ethics no longer seem to exists. Sorry to say but for a vendor to have been in the industry for such a short time and to reach the status of a company that has been the pinnacle of innovation and invention, then I say anyone can claim the No 1 position on creative accounting and other innovative ways of doing business.
Cesar Franco 12/5/2012 | 5:26:40 PM
re: Huawei Snatches Ericsson's Crown

Copy? Take a look in the most advanced vendors in the mobile market to offer SDR, multitech controlles (BSC+RNC), high capacity radio controllers, the way Huawei designs lower consumption equipment, local swithcing in BTSs' or Nodes B and some other features. Surprinsingly HW has developed them faster than E/// or NSN... now NSN, ALU and E/// are catching up (copying?) these features.


I like Ericsson too much, they have consistency in their designs and strictly follow standards. NSN has a solid market share and both E/// and NSN also have innovative features.


My point: HWI is already creating innovative products... copying others worked at the beginning but it's not enough to become the leaders. Anyway, let's see if they still are by the end of the year


PD: take a look in WIPO report on patents: ZTE was first in 2011 and the next one in the telecom market is Qualcomm in sixth.

digits 12/5/2012 | 5:26:38 PM
re: Huawei Snatches Ericsson's Crown

The other revenues break-out that would be interesting tos ee would be Professional Services (managed services, systems integration, consulting etc)


In the second quarter, more than half of NSN's revenues came from services, while 44% of Ericsson's revenues camne from services. These sales deliver lower margins but also provide more predictable revenues that can/should also cement service provider relationships, so there are pros and cons to having such a large portion of sales from services. Huawei has been trying to challenge in this market and has had some success, but I'd love to see what sort of progress it has made... this might be a market sector that is beyond even Huawei in terms of getting to the top of the tree. &nbsp;&nbsp;

Flook 12/5/2012 | 5:26:33 PM
re: Huawei Snatches Ericsson's Crown

Either it's too early in the day or I'm really losing mental bandwidth, but where's Cisco???

digits 12/5/2012 | 5:26:30 PM
re: Huawei Snatches Ericsson's Crown

These are vendors with the telco service provider community as tghe primary target market, whereas Cisco has service providers as a lesser slice of its business.


In the past I had included Cisco in the mix... in fact, this one table where I did now makes for interesting viewing (with Huawei in 5th spit just a few years ago...)


http://www.lightreading.com/document.asp?doc_id=175706

NoiDoi 12/5/2012 | 5:26:21 PM
re: Huawei Snatches Ericsson's Crown

Most quantitative analyst groups would discount Huawei's stated revenues by about 25% as a minimum.&nbsp; Competitors, such as Cisco, would argue over 50%, but that's just Cisco trying to manipulate market share and pretend that life is good.

Soupafly 12/5/2012 | 5:26:21 PM
re: Huawei Snatches Ericsson's Crown

@ edwilley3; I note with interest your disclaimers. ;)


In my dealings with Huawei, whenever I met with the western staff they openly speculated about the validity of the numbers that the company publicly quoted. They have all now left the company.


No-one (on the western side) has ever been able to work out how they calculate &amp; settle upon the final numbers. The accounts are audited &amp; signed off by KPMG, so I guess all we have are interesting questions.


Given Huawei's global operational footprint, it would also seem logical that they have exposure to bad debt somewhere in their portfolio of customers &amp; deployments. You cannot win the depth &amp; breadth or contracts in Africa, Middle East and parts of Asia Pac and not have some exposure to defaults, regime changes and economic turmoil.


In all the accounts that I have seen there are no stats, anywhere which would represent or reflect what that exposure might be. They may exist, its just I haven't seen them. In china, there system has no recognition of the concept of bad debts &amp; what they are. There its not an option not to pay. The only question is when &amp; how much you pay.


So whilst publicly the company is doing amazingly well, privately, it would be reasonable to speculate that there are numerous questions about the how, what, when &amp; where this miracle is actually taking place.


Given the company's meteoric rise to global prominence, and its provenience and history - I think the questions are inevitable.


&nbsp;


&nbsp;

Soupafly 12/5/2012 | 5:26:20 PM
re: Huawei Snatches Ericsson's Crown

Thanks for the stats tip NoiDoi.


@ Edwilley3; Be careful! You will get macster and other paid shills all excited!&nbsp; Huawei has paid staff monitoring these boards (hence why your disclaimer made me smile. :) and they are semi-hysterical in tone &amp; content. All of them will deny working for the company also. They will swear they work for someone else &amp; are just concerned citizens. Its comical!


Trust me, I have 1st hand experience! Just check my profile &amp; post history. It will all become clear.


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