SHENZHEN, China – Huawei released its 2011 financial report in advance of its 9th Annual Global Analyst Summit being held this week at its Shenzhen headquarters. In advance of the gathering, Huawei announced top line sales revenue of $32.4 billion. Net income stood at more than $1.8 billion, representing a 5.6% profit margin, a decline of about one-half compared to last year.
In terms of segment performance, revenue results and associated growth rates for the company’s reporting segments are as follows:
–Carrier Networks: $23.8 billion (+2.9%)
–Consumer: $7.1 billion (+44.3%)
–Enterprise: $1.5 billion (+57.1%)
The company also increased sales to customers outside of China to $21.9 billion, which now represents 68% of the company’s business (up from about 65% last year). Huawei also indicated that it spent $3.8 billion on research and development in 2011, which represents 11.6% of top line sales.
While the Chinese vendor continues to exhibit impressive overall growth, slowing of top line growth in its core Carrier Networks business to the low single digits makes it clear that the vendor has entered a new phase in its existence. In order to keep up the double-digit growth that it is accustomed to generating, its Consumer and Enterprise business groups will need to step up as the company’s primary growth engines.
To be clear, this is not a revelation. In fact, the company acknowledged as much at last year’s Global Analyst Summit. With that in mind, however, a closer look at the details of Huawei’s execution should provide an interesting glimpse into how Huawei is dealing with the challenges associated with being a global incumbent.
In particular, progress related to the Enterprise leg of its ICT convergence strategy will be telling. While the Enterprise group showed the strongest growth rate, the company managed to grow the business group by a little over $500 million from 2010 to 2011. Given Huawei’s past growth history, and the focus that Huawei paid to launching the Enterprise group as its own independent business group last year, it will not be surprising if analysts come back to Shenzhen this year with questions about the business group’s nominal growth.
For a few years now Huawei has described itself not as a Chinese company, but as a “Global company headquartered in China.” Few would question that the company has achieved this goal – both in perception and reality. Now, of course, Huawei will probably have to deal with rationalizing market expectations built on years of explosive growth versus the reality of operating as the proverbial “front runner.”
The good news, of course, is that the vendor appears to be making disruptive progress on its device and/or chipset strategy, and that it continues to be one of the largest in network equipment vendors in the world. Flush with a pile of cash from another highly profitable year – by industry standards, if not its own recent history – to invest in R&D, and this year’s Global Analyst Summit should be another upbeat affair.
