Huawei's Network Sales Up Around 32% in 2016

Chinese equipment vendor Huawei looks set to report an increase in sales of about 32% at its carrier and enterprise businesses for the 2016 fiscal year, judging by the progress it has today reported at its consumer devices division.

While yet to report full results, rotating CEO Eric Xu previously said that overall 2016 sales are estimated to have risen about 32%, which would see Huawei Technologies Co. Ltd. generate about 520 billion Chinese yuan ($75.1 billion) in revenues, based on its 2015 annual report. (See Is Huawei in for a Bumpy 2017? and Another Bumper Year: Huawei Sales Soar 32% to $74.8B.)

Following that announcement, Huawei's devices business earlier today flagged a 42% increase in revenues, to RMB178 billion ($25.7 billion).

The implication is that Huawei made about RMB343 billion ($49.5 billion) from sales of network gear and services to its telco and enterprise customers, having generated revenues of about RMB260 billion ($37.6 billion) from these sets of customers in 2015.

Revenues From Network-Related Sales ($B)
Source: companies.
Source: companies.

That means sales grew at an even faster pace than in 2015, when Huawei reported a 28% increase in revenues from its carrier and enterprise units combined.

The results contrast sharply with the recent performance of Ericsson AB (Nasdaq: ERIC) and Nokia, Huawei's two main equipment rivals.

While the Swedish and Finnish players have yet to report full-year results, they suffered year-on-year revenue declines over the first nine months of 2016.

Both companies saw revenues fall by about 9% during that period, compared with the first nine months of 2015.

Direct comparisons are not easy given the differences between the three companies. Huawei, for instance, now generates more than a third of its total revenues from consumer devices, and is determined to become the world's largest maker of smartphones over the next five years -- overtaking both US-based Apple and South Korea's Samsung.

Both Ericsson and Nokia Corp. (NYSE: NOK) have exited the handset market in the last few years. And while Ericsson is focused on mobile, Nokia has become a major player in the fixed-line and core networks markets since completing a takeover of rival Alcatel-Lucent (NYSE: ALU) last year.

Nokia also maintains a licensing unit -- called Nokia Technologies -- that is collaborating with other manufacturers on the development of new devices.

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Even so, all three companies still generate the bulk of their sales from the network equipment and services they provide to carrier and enterprise customers.

For Huawei, the proportion of revenues generated in these areas is now about 66%. Ericsson, meanwhile, made about 94% of revenues from network and service sales over the first nine months of 2016, with the remainder coming from so-called "support solutions." And Nokia's networks business accounted for 91% of total revenues over the same period.

When those other activities are stripped out, Ericsson recorded a 9.5% drop in network and service sales in the first nine months of 2016, compared with the year-earlier period, while Nokia Networks saw revenues fall 11%.

Both Western vendors have warned investors that conditions will remain tough in 2017, although their guidance points to an improvement compared with the situation in 2016. (See Ciscosson Looks to WiFi for 2017 Boost.)

Huawei, by contrast, has been striking a more pessimistic tone in recent proclamations. In his New Year message, Xu talked about growing "political and economic uncertainties" and complained that Huawei's operating efficiency and cash flow have seen little improvement, despite the double-digit growth in sales.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

mendyk 1/9/2017 | 9:54:10 AM
Re: Will these numbers be used as a stick by investors? Right -- software can have significantly better margins, but hardware provides revenue volume.
danielcawrey 1/8/2017 | 3:55:52 PM
Re: Will these numbers be used as a stick by investors? @mendyk, Everyone tries to say these days they are not a hardware company... problem with that is if you can pair software and services with the gear there's a lot of money to be made. I don't expect that to change anytime soon. Huawei included. 
mendyk 1/6/2017 | 11:06:20 AM
Re: Will these numbers be used as a stick by investors? Good point, Ray -- the changing fortunes also make me wonder whether the whole "we're not a hardware company anymore" movement was a bit ... premature.
[email protected] 1/6/2017 | 9:43:41 AM
Will these numbers be used as a stick by investors? I wonder if these sorts of numbers are used as a stick by investors in other companies to beat up Huawei's rivals. Someoe, somewhere must be saying to the other companies - if Huawei can do it, why can't you?

It's not as clear cut as that, I know, but just how much of this is down to corporate culture? Maybe that culture will backfire eventually but in the meantime... will 2017 be the year when further names go out of business due, in part, to the impact of Huawei's growth?  
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