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Huawei's Margins Squeezed in 2011

Huawei Technologies Co. Ltd. saw its total global revenues increase by 11.7 percent in 2011 to 203.9 billion yuan renminbi (US$32.3 billion), not quite enough to swipe the global telecom vendor sales crown from Ericsson AB (Nasdaq: ERIC), which increased its 2011 revenues by 12 percent to 226.9 billion Swedish kronor ($33.5 billion). (See Ericsson Suffers Margin Crunch.)

But Huawei's net profits dipped by 52.9 percent to RMB11.65 billion ($1.84 billion), according to the vendor's annual report published Monday.

The Chinese giant, which has been pushing hard in the enterprise and mobile device markets during the past year, saw its gross margin slip by 6.5 percentage points to 37.5 percent while its operating profit sunk by 39.4 percent to RMB18.6 billion ($2.95 billion).

Table 1: Huawei Key Financial Figures 2008-2011
2008 2009 2010 2011
Revenues RMB*123.1 billion RMB146.6 billion RMB182.5 billion RMB203.9 billion
Gross margin NP NP 44% 37.5%
Operating margin 13.9% 15.2% 16.8% 9.1%
Net income RMB7.9 billion RMB19 billion RMB24.7 billion RMB11.65 billion
* = Chinese yuan renminbi
NA = not provided




The company's total operating expenses grew by 16.5 percent to RMB57.9 billion ($9.2 billion) and its operating margin slipped to 9.1 percent.

Huawei said that the dramatic dip in net profits was partly due to unfavorable currency exchange fluctuations, and that once adjusted for the shift in exchange rates its net profit would have been down by 36.6 percent compared with 2010. Profits were also hit by "increased price competition" in the carrier networks market and by more "controlled" capital expenditures by operators.

That carrier networks market still accounted for 73.6 percent of Huawei's 2011 revenues, or RMB150.1 billion ($23.8 billion), while its Consumer Business (devices, including mobile handsets) accounted for RMB44.6 billion ($7.1 billion) of 2011 revenues, or 21.9 percent of the total. Huawei's Enterprise Business division generated revenues of RMB9.2 billion ($1.46 billion), or 4.5 percent of total sales.

Geographically, only 32.2 percent of the vendor's revenues, RMB65.6 billion ($10.4 billion), were generated in its domestic market in 2011, while the remaining 67.8 percent, or RMB138.4 billion ($21.95 billion), came from international sales. Huawei's domestic revenues were up 5.5 percent year-on-year, while its international revenues grew by 14.9 percent.

For more on Huawei:

— Ray Le Maistre, International Managing Editor, Light Reading

digits 12/5/2012 | 5:34:48 PM
re: Huawei's Margins Squeezed in 2011

Well, we got a response and put the numbers, response and background together in a new artcicle


 


The Number's Up for Huawei


http://www.lightreading.com/document.asp?doc_id=220351

digits 12/5/2012 | 5:35:29 PM
re: Huawei's Margins Squeezed in 2011

Yikes!


I am asking about these changes - let's see what the explanation is....


Ray

pjbclarke 12/5/2012 | 5:35:29 PM
re: Huawei's Margins Squeezed in 2011

I understand your explanation. Most of those restatments seem to be minor (eg <5%), but as i compared reports from previous years i found a bigger anomaly . In 2009 and again in 2010 they said Net profit  for 2007 was 7, 558, but in this years report its noted as 12, 641 which is a variance of ~67%

digits 12/5/2012 | 5:35:30 PM
re: Huawei's Margins Squeezed in 2011

Hi


Indeed, those figures for 2008 and 2009 are in the 2009 annual report.


 


But...


The 2011 annual report, published today, includes historical operating profit numbers and operating margins for those years that provide a historical comparison (included in the table in the article).


However, the operating numbers provided in the 2011 report for 2008, 2009 and 2010 differ from the numbers provide in the 2009 and 2010 annual reports.


There must have been some post-reporting adjustments made following the publication of the 2009 and 2010 reports, resulting in the different numbers published in the 2011 report.


But the 2011 report does not provide historical gross margin numbers for 2008 and 2009, just 2010.


So, to provide a consistent comparison, I couldn't mix up the numbers from multiple annual reports - I just had to take the numbers from the 2011 report published today.


Hope that makes sense.


Ray

pjbclarke 12/5/2012 | 5:35:32 PM
re: Huawei's Margins Squeezed in 2011

are noted on p13 of 2009 report as





39.6% (2009) 39.7% (2008)







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