Huawei Closes in on Ericsson as Sales Triple Over Five Years
April 18, 2011, 4:29 AM EDTBy Bloomberg News
(Updates with market share data in 11th paragraph.)
April 18 (Bloomberg) -- Huawei Technologies Co., China’s largest maker of phone equipment, narrowed the gap with global market leader Ericsson AB to about two weeks of sales after revenue almost tripled in the past five years.
Growth in international sales raised Huawei’s total revenue to 185.2 billion yuan last year, from 66.4 billion yuan in 2006, the Shenzhen-based company said in its annual report today. That’s about $27.36 billion, based on the average exchange rate for the yuan to the dollar last year. Ericsson’s 203.3 billion Swedish krona in sales were equal to about $28.3 billion at the average exchange rate.
Chief Executive Officer Ren Zhengfei, who founded the company in 1987, initially led Huawei outside of China through sales to Asia and Africa and is now increasingly focused on winning sales in Europe and the U.S. Employee-owned Huawei got 65 percent of its revenue from international markets last year, up from 60 percent in 2009, according to data in the report.
“What’s still missing for Huawei is the U.S.,” Duncan Clark, chairman of BDA China, a Beijing-based technology consultancy, said in an interview today. “It’s pretty impressive the company can almost become a global leader without the U.S. market. Huawei is in the top tier now and with free access to the U.S., it would become very much the top dog.”
U.S. Expansion
The company’s efforts to expand in the U.S. for the past three years have run into opposition from U.S. lawmakers. In February, Huawei dropped plans to purchase patents from Santa Clara, California-based 3Leaf Systems to comply with a recommendation by the Committee on Foreign Investment in the U.S. Prior to 3Leaf, Huawei failed in bids to acquire companies including 3Com Corp. in 2008 and 2Wire Inc. last year.
Huawei began disclosing biographies of its board directors to highlight “Huawei’s continuing efforts towards enhancing openness and transparency.”
Board members include Chairwoman Sun Yafang, four deputy chairmen and four executive directors, including Chief Financial Officer Meng Wanzhou. Meng was identified as Ren’s daughter by the website Caixin in October. Huawei spokesman Ross Gan didn’t respond to requests for information on whether Meng and Ren are related.
While Huawei’s sales have grown 179 percent since 2006, Stockholm-based Ericsson’s have increased 13 percent in the same period, according to the companies’ annual reports.
Narrowing Gap
In U.S. dollar terms, the remaining gap in total revenue of about $930 million between Ericsson and Huawei is equal to less than two-week’s worth of Huawei’s weekly sales of about $526 million last year, according to Bloomberg calculations of data supplied in the annual report.
Based on current exchange rates, the value of Ericsson’s 2010 sales were 16 percent larger than Huawei’s.
Huawei held about 15.7 percent of the $78.6 billion global market for carrier network infrastructure last year, second to Ericsson’s 19.6 percent share, according to estimates from research firm Gartner Inc. on April 11.
Huawei, which didn’t win its first contract outside China until 1997, achieved international sales of more than $100 million by 2000. Overseas business exceeded contracts in China for the first time in 2005, according to the company’s website.
Employee-Owned
Huawei’s international sales jumped 34 percent to 120.4 billion yuan last year, the annual report said. Its sales in China gained 9.7 percent to 64.8 billion yuan. The China market declined to 35 percent of Huawei’s sales last year, from 40 percent in 2009.
Net income rose 30 percent to 23.8 billion yuan, from 18.3 billion yuan a year earlier, Huawei’s report said.
Huawei’s website says the company is employee-owned and the Chinese government holds no shares. The company has 110,000 employees, the annual report said.
Ren retired from China’s army in 1983 as a deputy director of the military’s Engineering Corps, the annual report said. He established Huawei with 21,000 yuan of capital, according to the report.
--Edmond Lococo, Editors: Anand Krishnamoorthy, Young-Sam Cho
To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
