Huawei Technologies plans an aggressive push into the enterprise and device sectors to help it sustain the momentum that saw it grow profit 30% last year.
Net profit rose to 23.8 billion yuan (€2.5 billion) in 2010, while sales were up 24% to 185.2 billion yuan. The bottom line was lifted by strong growth in international sales - which contributed 65% of the total revenues last year, up 60% from a year earlier.
Huawei now trails Ericsson – which posted about $28.3 billion (€19.5 billion) in revenue in 2010 - by around two weeks of sales, according to Bloomberg BusinessWeek.
To maintain its growth, Huawei is now restructuring with a "market oriented corporate governance structure," consisting of four business units – carrier network, enterprise business, devices, and ‘other’, with top brass at individual business units reporting directly to founder and CEO Ren Zhengfei.
Huawei said the enterprise business, which launched in 2010, will remain a key focus through 2011.
“Huawei is strategically increasing investments in the enterprise business, and offering services in industries such as e-Government, finance, energy, education, and retail, and helps customers improve their operating efficiency,” a spokesperson told Telecoms Europe.net.
The company also has high hopes for its device and cloud computing businesses. Sales from devices rose 24.9% year on year to 30.7 billion yuan in 2010, and the company plans to ship 60 million handsets this year.
Geographically, the firm is seeing potential in emerging markets, such as India, Brazil, and Russia, the spokesperson said. Europe is another area for growth as the continent further recovers from economic instability.
Matt Walker, principal analyst at Ovum, said while Huawei has had success leveraging its strong position in carrier networks to grow revenues in handsets (dongles, entry-level and feature phones) and professional services, it won’t be easy for the company to use same strategy to expand its enterprise and smartphone businesses.
“In the case of enterprise markets, there is some potential to sell to enterprises indirectly, through service providers. However, this happens most often for the cheapest equipment and smallest enterprises,” he said.
“For the larger enterprise customers, Huawei is a new face to them. They have to learn about them, and be persuaded as to why they should switch from incumbent suppliers. It is not an easy sell.”
In the smartphones sector, the unit costs are higher and the brand image of the device is more important to purchasing, he noted. Hence, for Huawei to further penetrate the smartphone market, it will also have to build a reputation with the consumer market that cannot leverage its networks base.
Despite all that, political opposition will remain the main barrier for Huawei’s push into the US market, Walker said.