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Huawei's 2012 profits to jump 10%, firm promises 'continuous strategic investment'

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Huawei, the world's second largest network gear vendor after Ericsson (NASDAQ:ERIC), expects to post at least a 10 percent jump in 2012 net profit. The figure is a reversal from the 53 percent decline in profit Huawei recorded in 2011.

In a memo posted on the company's website, acting CEO Guo Ping told employees that revenue is expected to exceed $35 billion for 2012 and net profit will hit $2.4 billion, both up more than 10 percent year-over-year.

Huawei had posted net profit of $1.8 billion for 2011, down from $3.9 billion in the year-ago period. Overall revenue rose 11.7 percent to $32.3 billion in 2011.

Huawei was the sixth-largest handset maker in the world in the third quarter of 2012, according to ABI Research. The company is making inroads in handsets in Western markets, including the United States, where its network infrastructure efforts have been largely stymied.

The biggest black eye for Huawei came in October when a U.S. government report said Huawei and ZTE pose a security risk to the United States because their equipment could be used for espionage. The report, from the House Permanent Select Committee on Intelligence, recommended the U.S. block acquisitions and mergers involving Huawei and ZTE and also recommended that the U.S. government and U.S. companies avoid using equipment from the two Chinese companies. Huawei and ZTE pushed back aggressively against the report's conclusions, and have repeatedly said they do not pose a security threat and have no ties to the Chinese military or government. The Chinese government has also denied the claims and has suggested that the report could set back relations between the United States and China.

Despite that difficulty, Guo said in 2013 the company should be laser-focused on continuing stable growth in its business units. "We should devote our limited energy to specific business objectives, and avoid the impulse to expand business blindly," he wrote. "Managers who expand business blindly must be held accountable."

Guo wrote that in the past, rapid growth and strong execution was what the market saw in Huawei. Now, he said, the company needs to "ensure reasonable profits to support our continuous strategic investment."

For more:
- see this Huawei post
- see this Reuters article
- see this FT article (sub. req.)

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