Bloomberg News

IBM Hired by Huawei for Brand Advice on Tablet, Cloud Expansion

September 15, 2011

Sept. 15 (Bloomberg) -- International Business Machines Corp. was hired to advise Huawei Technologies Co. on branding strategy as the Chinese telecommunications gear supplier expands into tablet computers, smartphones and cloud computing.

The project involves 25 consultants from the world’s biggest computer-services provider and is expected to be completed by the end of November, Ross Gan, a Huawei spokesman, said in an interview today. Harriet Ip, a spokeswoman for Armonk, New York-based IBM in Singapore, confirmed the arrangement by phone today. Financial terms weren’t disclosed.

“It’s not a traditional branding project where they tell us how the brand should be positioned,” Gan said in a phone interview from Huawei’s headquarters in Shenzhen, southern China. “It’s more from the management-of-the-process point of view: How do I manage the brand function within the organization? Who is responsible for what?”

Huawei is expanding its 13-year relationship with IBM as it seeks to more than triple sales to $100 billion in the next 10 years by expanding into consumer digital devices and enterprise computing. The thrust requires closely held Huawei to promote to consumers, businesses and government agencies, including those in the U.S., where efforts to buy rivals have been rebuffed amid allegations the company threatens national security.

The interagency Committee on Foreign Investment in the U.S. in February told Huawei, founded in 1988 by former Chinese army officer Ren Zhengfei, to divest its purchase of 3Leaf Systems after lawmakers said the deal threatened national security.

Bids Thwarted

3Leaf, founded in 2004, developed technology for cloud computing that lets businesses and government agencies move applications and programs such as e-mail to remote networks owned and operated by a third party. Huawei was also thwarted in bids to buy 2Wire and Motorola Inc.’s wireless business last year, and 3Com Corp. in 2008.

Huawei has said its employees own the company and China’s government and military don’t hold any shares. Ren has had no connection to the military since he retired from service more than two decades ago, according to Huawei.

Huawei in April unveiled plans for the thrust into consumer devices, including tablets, smartphones and “enterprise computing,” setting up computer and communication networks for businesses and government agencies.

Enterprise Computing

The company said at the time it expects enterprise computing revenue to grow to as much as $20 billion within five years, from $2 billion last year. Sales of mobile devices may rise to $20 billion in the same period from $5 billion last year.

Huawei’s relationship with IBM started in 1998 when Ren began traveling to the U.S., Europe and Japan to learn international best practices as his company expanded globally.

In 1999, the Chinese company added collaboration on research and development and supply chain management to IBM’s roles. Human resources management was added in 2005 and financial management in 2007. The new contract is the first for work on brand strategy from Huawei, Ip of IBM said.

“IBM has a very strong branding strategy,” Ip said. “After several rounds of doing this ourselves, we have the expertise to help clients as well. That’s something we can share with Huawei and our other clients.”

Huawei won its first contract outside China in 1997. It achieved international sales of more than $100 million by 2000, and overseas business exceeded contracts in China for the first time in 2005, according to data supplied by the company.

--Edmond Lococo. Editors: Garry Smith, Dave McCombs

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


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