2012 Huawei Global Analyst Summit: ramping up the game

Dan Bieler; Bryan Wang; Henry Dewing; Katyayan Gupta; Tirthankar Sen

Huawei hosted about 160 industry and financial analysts at its annual analyst summit in Shenzhen, China in April 2012. The main take-aways from the event are:

  1. Huawei continues its drive for more financial openness and transparency. Huawei provided detailed information about its financial and operational performance. In 2011 Huawei grew revenues by 12% to reach US$32.4bn and EBIT by 9% to US$3bn. The main regional growth was registered in Latin America, up 40%. Although due to higher capex cash from operating activities declined, the cash margin stood at 9%. Huawei is easily able to fund its expansion and innovation activities. In 2011, Huawei hired 30,000 new staff, bringing the total to 140,000 globally. For 2012 Huawei targets between 15-20% sales growth.
  2. Huawei places main growth emphasis on enterprise services and consumer devices. These market segments represent a potential target market with a combined value of about US$1.7 trillion, compared with the carrier equipment market value of about US$150 billion. Huawei repeatedly pointed out the early-stage nature of its activities in these areas. It even felt as if Huawei consciously played down its ambitions in order to downplay expectations.
  3. Huawei must strengthen its go-to-market strategy for its enterprise business. With more than 40% of Huawei’s current business coming from China, Huawei has to continue to fine tune its go-to-market model and penetrate markets other than China in a swift manner. Huawei also has to push for stronger relationship with their partners and increase their share in the total revenue.

The event was not marked by major announcements, but instead provided updates:

  1. Carrier Network activities become increasingly software focused. Huawei is building up its network software and professional services capabilities. In fact, Huawei goes as far as to say that hardware will be fairly commoditised and that differentiation will be based on software. Part of this differentiation drive are Huawei’s membership in over 130 industry-standard-defining bodies, its own silicon chip fabrication capabilities (HiSilicon), its servers, blade and rack configurations designed to support cloud and virtualization environments as well as Huawei Symantec, which provides firewalls, VPNs, intrusion detection, application gateways and unified threat management. Huawei’s cloud operating system delivers large scale virtualization capability for ´compute and storage resources in a cloud deployment.
  2. Consumer devices complete the end-to-end pitch for Huawei. Huawei is best suited to leverage manufacturing capabilities in its homeland, China, to mass-produce smart devices. Moreover, as it can manufacture processors in-house through its HiSilicon subsidiary, it can control and reduce the overall price of these devices.
  3. Enterprise Business opens up huge opportunities. The division is only one year old, but has about 20,000 staff. Huawei offers a complete set of enterprise networking products including routing and switching, servers, storage, security, virtualization, and professional services.

A key task for Huawei is to move swiftly in its G2M. Branding should be the key focus: a major focus for Huawei this year. Moreover, Huawei needs to create value for channel partners. With a shrinking number of partners and already established channel relationships with competing vendors, Huawei needs to talk more than just margin and growth when it recruits partners. In this context, Huawei should focus on the SMB segment, not least because Asia Pacific, with its large SMB presence, can be highly potential market for Huawei.

One of Huawei’s greatest strengths is its ability and willingness to take a much longer-term perspective than its (listed) Western counterparts. Huawei culture focuses the long-haul and is prepared to take risks. Meanwhile, Huawei remains a company that thrives on being underestimated. The list of competitors that had to change their view of Huawei from a company that is observed through the rear mirror to one that is front of them is long, particularly in the network infrastructure space.

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