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Huawei forecasts higher earnings despite US hostility

Chinese networking giant expects its net profit for 2013 to climb 34.6 percent to hit US$3.41 billion on higher revenue of US$38.19 billion. The robust performance comes despite threats to ban its products and a tensed relationship with the U.S. government.
Written by Eileen Yu, Senior Contributing Editor

Huawei Technologies says it has achieved its business targets for 2013 and expects to report a 8.6 percent climb in revenue to 239.03 billion yuan (US$38.19 billion), from 220.2 billion yuan in 2012. 

Operating profit for 2013 also increased by 41 percent to 29.13 billion yuan (US$4.73 billion), while net profit climbed 34.6 percent to hit 21 billion yuan (US$3.41 billion) from 15.6 billion yuan (US$2.54 billion) in 2012. In a statement released Monday, the Chinese networking giant attributed the strong showing to a "favorable global macroeconomic and industry environment" that's moving toward wider connectivity as well as growth in its carrier business. 

Eric Xu, Huawei's Rotating and Acting CEO, said: "Our significant global presence has helped us achieve stable and continuous growth in the carrier network, enterprise, and consumer businesses."

He said the company's carrier network business clocked 166.5 billion (US$27.02 billion) in sales, growing 4 percent year-on-year. Revenue from its enterprise and consumer businesses also grew 32.4 percent and 17.8 percent, respectively, to 15.2 billion yuan (US$2.47 billion) and 57 billion yuan (US$9.25 billion), said Xu, who will end his CEO duties this month. 

Some 65 percent of Huawei's overall 2013 revenue came from outside of of China, while its domestic market generated 84 billion yuan (US$13.63 billion) in revenue, a 14.2 percent over 2012. 

Huawei earnings
Huawei earnings

Xu said Huawei invested some 30.7 billion yuan (US$4.98 billion), or 12.8 percent of its revenue, in research and development (R&D) which, over the past decade, had exceeded 151 billion yuan (US$24.51 billion). He said the company would continue to pump up its research efforts in basic scientific and engineering technologies. 

"In the past year, to adapt to the future development trend, Huawei published the SoftCOM network architecture to develop ICT-convergent products and solutions," he said, adding that the company aimed to build the "world's most efficient and integrated digital logistics system" to facilitate full connectivity between people, people and things, and things and things--in other words, the Internet of Things. 

Huawei this year expects increasing penetration of ultra-broadband and mobile broadband, particularly LTE, to offer significant opportunities. Xu pointed to smart devices as another key focus area for the company.

Xu said: "Huawei is still a young company, and the ICT industry is booming. While continuing to pursue a more focused strategy and a leaner management style in 2014, we will work to expedite steady growth to lay a solid foundation for the company's development over the next 10 years, especially to pursue a leading position in the enterprise business."

Its full-year results were audited by accounting firm KPMG, the Chinese company said.

Huawei earlier this month said it was targeting to hit US$10 billion revenue by 2017 from its enterprise business, with cloud leading the way. The business division chalked up US$2.5 billion in revenue last year, climbing 32 percent, and would register a higher growth rate in 2014, the company said.

The Chinese vendor's robust 2013 performance comes despite threats to ban its products and a tensed relationship with the U.S. government, which has long accused Huawei of spying on U.S. companies on behalf of its government. Furious over the allegations, in which U.S. companies were urged to boycott its products, Huawei last year described the U.S. market as a "commercial disappointment" and declared it was no longer interested in the market. The company's COO for U.S. enterprise business, however, said in January the Chinese vendor had no plans to abandon the market. Jane Li said Huawei was still engaging partners and customers in the U.S. about its products and response had been "extremely positive".

Just last week, the Chinese government demanded an explanation over reports the US National Security Agency (NSA) had hacked Huawei's servers and spied on the vendor's senior executives. Documents provided by NSA whistleblower Edward Snowden revealed NSA infiltrated the servers in Shenzhen which Huawei said connected a third of the world's population and tracked communications of Huawei's top executives.

The Chinese vendor in January also hit out at the U.K. government's ban on its videoconferencing equipment, dismissing concerns over its links to the Chinese government as "misleading" and based on "inaccurate" information. The U.K. government departments including the Home Office, Ministry of Justice, and Crown Prosecution Service were reportedly instructed to stop using the systems during internal meetings amid concerns they could be embedded with tapping devices. 

In its statement Monday, Huawei also announced Guo Ping will be its next Acting CEO from April 1 to to September 30 this year. The company's Rotating CEO system comprises an interim chief who oversees Huawei's operations and crisis management during his tenure, and is responsible for convening and chairing meetings with the board of directors and executive team.

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