Huawei profit slumps in 2011

Huawei’s net profit more than halved in 2011, as heavy spending on research and development and forex losses took their toll on the firm.
The firm’s profit fell to 11.6 billion yuan (€1.3 billion) in 2011 from 24.7 billion yuan in 2010, despite it growing revenue 11.7% year-on-year to 203.9 billion yuan. The sales growth was driven by Huawei’s consumer business, which generated a 44.3% rise in revenue year-on-year after shipping nearly 150 million consumer devices – including 20 million smartphones – during the year.
Meanwhile, Huawei’s enterprise unit generated 9.2 billion yuan in sales during its first full year of operation as a core business group.
But the sales growth came at a cost, with R&D spending for the year growing 34.2% to 23.7 billion yuan.
An exchange loss of 4.87 million yuan as a result of the ongoing appreciation of the currency also contributed to the net profit decline, along with a 6.5 percentage point decrease in gross profit margin to 37.5% - which has been attributed to intense competition in the handset sector.
Despite the growth in the consumer and enterprise segments, infrastructure sales still contributed 74% of Huawei's total revenue for the year. However infrastructure revenue grew just 3% during the year to 150.15 billion yuan.
Total domestic sales revenue grew 5.5%, and overseas revenue increased 14.9%.
Despite the slump in profit, Ken Hu, Huawei’s rotating and acting chief executive, says 2011 leaves the firm in a strong position. “We have made strategic investments, augmented our R&D capabilities, and deployed resources globally, and implemented a future-oriented business architecture that puts Huawei in a confident position for sustained growth,” he states.