Huawei: We're No 'Coward Company'
Handsets are just one part of Huawei's diversification strategy. The company's aim is to shrink the carrier business from 72 percent to 60 percent of total revenue by 2017, with the devices group accounting for 25 percent and enterprise 15 percent. The enterprise business is still in its relative infancy. Whereas the company has been making devices, mostly on an ODM (original device manufacturing) basis, for many years, the enterprise unit has just completed its second full year. It's performing well, though, with sales up 26 percent to $1.85 billion, or 5.5 percent of the total, in 2012, compared with 3 percent in 2011. The group has forecast a 45 percent bump in revenue this year to $2.7 billion. Huawei hasn't disclosed its enterprise margins, but it says the group is profitable. The business keeps it simple, selling mostly networking gear and IT solutions. With the U.S. market all but closed to the carrier and enterprise units, Europe has become a major focus for the company. Last year it announced R&D initiatives in both the U.K. and Finland and aims to make the region its biggest base outside China. (See Huawei Starts Mobile Device R&D in Finland and Huawei Unveils UK Investment Plan.) Executive vice president Eric Xu (who revealed at the company's recent analyst conference how Huawei is viewing the U.S. market these days) said the company, which built its business on emerging market operators, would now focus on developed economies and the China market. (See Huawei Gives Up on US Telecom.) Taking on the 'superheroes'
But it's the devices team that has the hardest task. "Even if we are the third largest, we are nobody in the world. It is a really crowded and tough market," said Shao. Competitors include "superheroes like Samsung and Apple, and strong players like Sony and Nokia." He says branding specialist Interbrand told him that virtually none of the Interbrand 100 (leading global brands) was successful in both the consumer and enterprise markets, although there are some exceptions, such as Microsoft Corp. and a few financial giants. Shao takes heart from Huawei's plight 15 years ago when it began to compete globally against "the seven mountains of the telecom industry" -- Alcatel, Ericsson, Lucent, Motorola, Nokia, Nortel and Siemens. "Even today, I can remember their names," he says as he reels them off. Of course, Huawei and its aggressive pricing played a decisive role in disruption of that market: The brand-centric consumer business is a different story. Shao is confident Huawei can build world-class handset software and hardware. "But building a brand, and building a connection with the target audience, will be really, really hard." So far the company has adopted the tagline "make it possible," and plans to build a flagship retail store in China, probably in Beijing. It also has decided to position itself as "customer-oriented," in contrast to a brand such as Apple, which "tells customers to follow them." Shao acknowledges that Huawei currently lacks the marketing expertise and budgets to match its much bigger rivals, but says it's in it for the long haul. "Huawei will never be a coward company!" he vows. — Robert Clark, contributing editor, special to Light Reading