Managed Services

Huawei Doubles Profits in 2009

Huawei Technologies Co. Ltd. generated net income of 18.3 billion yuan renminbi (US$2.67 billion) from revenues of RMB149 billion ($21.8 billion) in 2009, according to the company's annual report, published today.

That represents a 19 percent hike in revenues, driven by the 3G buildouts in China and further international expansion (the vendor says it's now working with 45 of the world's top 50 carriers), and a 133 percent increase in profits, compared with 2008.

Huawei had released approximate revenues numbers earlier this year, but this is the first time it has released audited details, such as margins and profits. (See Huawei Claims 2009 Revenues of $21.5B.)

Confirmation that its 2009 revenues were nearly $22 billion means that it grew during a year in which the market shrank, and it's now bigger, in revenues terms, than some of its fiercest rivals. (See AlcaLu Revenues Shrink 11% in 2009 and Nokia Siemens Shrinks 18% in 2009 .)

Table 1: Huawei Grows In 2009
2008 2009 % change
Revenues RMB*125.2 billion/US$18.3 billion RMB149 billion/$21.8 billion 19%
Gross margin 39.7% 39.6% Down slightly
Operating margin 12.9% 14.1% Increase
Net income RMB7.85 billion/$1.15 billion RMB18.27 billion/$2.67 billion 132.8%
* = Chinese yuan renminbi

The dramatic increase in profits, though, was largely due to beneficial exchange rate movements. The Chinese vendor says that excluding the impact of exchange rate fluctuations, net income increased by 26.5 percent compared with 2008.

The vendor's gross margin was 39.6 percent, roughly in line with 2008's 39.7 percent, but operating margin improved to 14.1 percent from 12.9 percent.

Huawei expects to grow again in 2010, and plans to keep eating into the business built up over the years by its main telecom equipment vendor rivals, Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks , especially in the professional services sector that is now a key vendor battleground. (See Huawei Plays Managed Service Catchup, NSN Services Chief: Huawei's Years Behind, and Vendors Scrap Over Managed Services Deals.)

According to the vendor's annual report, "Professional Services is a key strategic investment for Huawei and our Managed Services, in particular, achieved rapid growth" in 2009.

Huawei, which now has 95,000 staff, says its professional services (comprising network integration, customer support, managed services, network technology services, and training) were particularly successful in China, India, the rest of the Asia/Pacific region, and in Latin America, while "in the more mature European markets, our sales from Professional Services increased only slightly over the previous year."

But it still struck deals with Telefónica O2 Germany GmbH & Co. OHG and Jazztel plc in Spain, and British cable operator Virgin Media Inc. (Nasdaq: VMED)., as well as Cox Communications Inc. in the US, and says it ended 2009 with more than 100 managed services deals worldwide. (See Huawei Wins Jazztel Deal and Huawei to Provide CDMA Tech for Cox .)

— Ray Le Maistre, International Managing Editor, Light Reading

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