BEIJING – The world’s second largest telecom equipment provider, Huawei Technologies, has reversed a fall in 2011 revenues with a 33% spike in net profit for 2012, and forecasts continued revenue growth powered by smartphone sales and cloud computing.
The turnaround was achieved by focusing on customers, streamlining management and improving efficiency said Cathy Meng, Huawei Chief Financial Officer who expects overall revenue to grow 10-12% in 2013.
"Cloud computing is a huge sector in the next five years. In the telecom industry, we are expecting a 5% increase in capital investments. Smartphone penetration is still way too low and there is a lot of room for growth," said Meng in a presentation.
Huawei, which ranks only behind Sweden's Ericsson, expects its 2012 global sales revenues to reach CNY 220.2 billion yuan ($35.4 billion U.S.), an 8% year-over-year increase, with a net profit of 15.4 billion yuan ($2.5 billion U.S.), a 33% increase from the previous year. The 2012 results audited by KPMG will be outlined in the company’s annual report, which will be released in April.
Meng added that Huawei’s success in 2012 can be attributed to maximizing value for the customer.
“We insist on strictly controlling G&A expenses and allocate more resources to bolster the front line and ensure continuous improvements on customer delivery and service quality,” explained Meng. “In addition, Huawei continued its ongoing management transformation, raising combined operating efficiency with an integrated financial services program.”
Huawei has also pledged to begin disclosing more detailed financial and shareholding information as it tries to assuage fears over suspected ties to the Chinese military.
The company claims it has invested 120 billion yuan ($19.2 billion U.S.) in R&D over the past 10 years, including a 29.9 billion yuan investment in 2012, accounting for more than 13% of the year’s revenue.
Huawei says it has strategically focused on developing sophisticated communications network infrastructure, or “pipe.” This includes investments in its carrier network, enterprise and consumer businesses in order to provide faster, broader and smarter information services to its customers, while addressing the challenges and opportunities in the era of big data. About 70% of Huawei’s revenue was generated from serving leading telecommunications operators, including 45 of the world’s top 50.
Huawei’s three business groups continued their steady growth and achieved performance in line with expectations. Huawei’s Carrier Network business group, reported sales revenues of 160.3 billion yuan. Huawei’s Consumer business group has sales revenue of 48.4 billion yuan, with sales continuing to grow in developed markets including Europe and Japan. Huawei’s Enterprise business group further developed its portfolio and won contracts, generating sales revenue of 11.5 billion yuan.
The company says 66% of its overall revenue came from outside China. Among the overseas revenue, the Asia-Pacific region saw revenue of 37.4 billion yuan, while Europe, Middle East and Africa recorded 77.4 yuan and the Americas contributed 31.8 billion yuan. The domestic market China recorded 73.6 billion yuan.
Huawei adds that one of the key factors for Huawei’s success is that the individual interests of Huawei employees are combined with the company’s sustainable growth – “meaning everyone works hard to ensure Huawei’s long-term development.” In practice this means the management team, from board members to middle-level managers, is limited to their salary, incentive bonus and stock dividends provided by the company, with policies to “ensure that no one in the company abuses their power for self-serving purposes.”
The convergence of mobile internet, smartphones, the digital and physical world is likely to generate hundreds of times more data in the coming years, which presents tremendous challenges as well as unprecedented opportunities for development of the ICT industry says the company. “Huawei believes that pipes with large bandwidth that can transmit and process massive data flow are the key to addressing these challenges and also Huawei’s key growth driver in the future,” it said in a statement.
