Bloomberg News

Huawei Expects Sales to Rise 20% This Year on Smartphones

April 25, 2012

Mobile handsets form a Huawei Technologies Co. sculpture at the Mobile World Congress in Barcelona, Spain. Photographer: Chris Ratcliffe/Bloomberg

Mobile handsets form a Huawei Technologies Co. sculpture at the Mobile World Congress in Barcelona, Spain. Photographer: Chris Ratcliffe/Bloomberg

Huawei Technologies Co., China’s largest maker of phone equipment, will boost research spending by 20 percent this year to fuel an expansion into smartphones and cloud computing, the acting chief executive officer said.

Spending will increase to $4.5 billion from $3.76 billion last year, Eric Xu Zhijun said at Huawei’s annual analyst day at its headquarters in Shenzhen today. The company disclosed this week that Xu is one of three rotating CEOs serving six-month terms. Xu’s rotation began this month.

Ren Zhengfei, Huawei’s founder and a former member of China’s military, and the co-CEOs are increasing the company’s focus on consumer mobile devices and business computing services after profit was cut by half in 2011. Huawei expects sales to increase as much as 20 percent this year amid demand from carriers and for its smartphones, Controller C.T. Johnson said.

“We have to expand our investment in research and development, and improve our innovation,” Xu said at the conference.

The company’s chipset-making ability is a key advantage and it can make money from its smartphone offerings, Xu said.

Profit fell to 11.6 billion yuan ($1.8 billion) in 2011, compared with 24.7 billion yuan a year earlier, Huawei reported April 23. Profit dropped as the company spent more on research and development, global expansion of new businesses targeting sales of consumer devices including smartphones, and computer services for businesses.

Rotating CEOs

Sales rose 11.7 percent to 203.9 billion yuan ($32 billion) in 2011, the company reported this week.

In addition to Xu, Deputy Chairmen Guo Ping and Ken Hu Houkun are also part of the rotating CEO pool, spokesman Ross Gan said in an April 23 interview. Ren, 67, retains the titles of CEO and deputy chairman of Huawei, according to the company’s annual report released the same day.

Huawei disclosed the members of its senior leadership team and board of directors for the first time in April 2011 after concerns were raised in markets including the U.S., where Ren’s military background has been cited by lawmakers as a potential security risk in regards to Huawei’s expansion.

The U.S. House Permanent Select Committee on Intelligence began a probe in November of whether Huawei poses a security threat.

Australia’s government also said Huawei wouldn’t be allowed to bid for work on its national broadband network because of security concerns.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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