Huawei operating margin declines despite 40% annual hike in H1 revenue

Huawei retained the confidence of industry analysts after revealing that its first-half operating margin fell from 18 per cent in the opening six months of 2015 to 12 per cent in the recent period.

The China-headquartered vendor revealed on Monday that margins had declined despite a 40 per cent year-on-year rise in sales to CNY245.5 billion (€33.4 billion/$36.7 billion) in the opening six months of 2016.

Analysts told the Financial Times that the drop in operating margin was likely due to Huawei's focus on the global smartphone market, but remained bullish on the vendor's performance.

Nomura technology analyst Leping Huang, for example, told the FT that margins in the device sector are normally lower than in the telecoms infrastructure market, while Iresearch analyst Lucky Zhong noted that the bulk of Chinese device vendors have margins of 10 per cent or lower.

In an announcement of its first-half revenue and margin, Huawei explained that its smartphone division, which it calls its consumer business, maintained steady growth through the first half of 2016 on the back of the popularity of flagship smartphones including the P9, Mate 8, and Honor V8. Huawei's MateBook laptop was also well received, the company said.

The vendor also noted that its carrier business achieved success in the opening half with a focus on four core areas: business, operations, architecture, and networks.

Huawei said its enterprise business is on "a fast development track" and continues to focus on products covering cloud computing, storage, SDN, and Internet of Things services covering cities and utilities.

CFO Sabrina Meng said the company generated "steady growth across all three of our business groups, thanks to a well-balanced global presence and an unwavering focus on our pipe strategy."

The CFO added that Huawei's management is confident the company "will maintain its current momentum and round out the full year in a positive financial position backed by sound ongoing operations."

For more:
- see this Huawei announcement
- view this Financial Times report

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