Huawei Reports 40% H1 Sales Growth But Margins Suffer

Huawei has once again reported jaw-dropping sales numbers for its latest trading period, reporting a 40% year-on-year increase in sales (in local currency terms) for the first half of 2016. (See Huawei Reports 40% Rise in H1 Revenues.)

The Chinese vendor says its revenues for the first six months of the year totaled 245.5 billion Yuan Renminbi ($36.7 billion) compared with RMB175.9 billion ($26.3 billion) for the first half of 2015.

But not all of its numbers are heading in the right direction: Huawei reports that its operating margin for the first half of this year was 12%, down sharply from 18% it reported for the same period a year earlier. Huawei's management is certainly keen to grow rapidly and become a $100 billion turnover company but it won't want to sacrifice profitability for the sake of milestone numbers.

However, even that 12% figure still looks healthy compared with rival Ericsson, which last week reported a second-quarter operating margin of 5.1% and which has just ousted CEO Hans Vestberg. (See Ericsson 'Doubles' Savings Goal as Sales Slump and Ericsson Ejects CEO Vestberg.)

Huawei is not providing any further details about its financial performance so far this year, though: The company says it managed "steady growth" across all three of its business groups -- Carrier, Enterprise and Consumer (devices).

The Enterprise business is still in its relative infancy and is growing fast, but from a relatively small base (revenues of about $4.3 billion for the full year 2015), while the Carrier business is mature but still managing impressive growth -- it generated sales of about $36 billion last year, up more than 21%. The Consumer business is the area where Huawei has been driving significant growth: In 2015 it grew its full-year device sales by nearly 73% to about $20 billion, about a third if its total revenues.

The Chinese vendor, which last year became the single biggest supplier of technology and related services to the global communications service provider (CSP) sector by sales, earlier this year estimated it would achieve full-year sales growth of 25% to around $75 billion: Currency exchange fluctuations could affect those numbers come the end of the year but all the signs are that the company is on course to dwarf its communications networking rivals during 2016. (See Huawei: New King of the CSP Market and Huawei Profits Soar Despite Forex Hit.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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