Huawei reported that its operating profit for the first half of this year fell 22 percent as it became the latest network infrastructure vendor to report weaker earnings amid a tough macroeconomic climate and caution from carriers.
Huawei reported an operating profit of $1.37 billion for the first half, down from last year but an improvement of 20.3 percent from the second half of 2011. Overall sales were up 5.1 percent compared to the first half of 2011 to $16.07 billion.
The Chinese vendor, the world's second largest network infrastructure provider after Ericsson (NASDAQ:ERIC), said it "continues to maintain robust growth momentum although the global economic situation and telecom equipment market remains a significant challenge." The company cited reduced investment from carriers and intense competition among the factors that contributed to its operating profit drop.
Earlier this year, according to Reuters, a senior Huawei executive told analysts that the company expected to post 15-20 percent growth in full-year 2012 revenues. Huawei's Scott Sykes told Reuters that the company is still confident that it will achieve the target.
Huawei is also facing continued pressure from lawmakers and regulators in the United States and the European Union over its alleged ties to the Chinese government and subsidies that the Chinese government may have given the company to undercut competitors' prices. Huawei has repeatedly denied such claims.
Still, Huawei is not alone among network infrastructure vendors reporting weaker than expected results:
- Nokia Siemens Networks reported an 8 percent drop in second-quarter sales and saw sales decline year-over-year in every region except Asia Pacific.
- Ericsson said its second-quarter net income fell 63 percent and reported weaker sales as carriers cut back on networks sales.
- Alcatel-Lucent (NASDAQ: ALU) said it will post an operating loss in the second quarter of around $48.8 million on revenue of $4.27 billion, and will miss its profit target for 2012.
- And ZTE warned its first-half profit may have fallen 80 percent from a year earlier. ZTE blamed the slide on reduced investment income, foreign-exchange losses and delayed network contracts.
- see this release
- see this Dow Jones Newswires article
- see this Reuters article
Network infrastructure vendors face tough Q2, road ahead
NSN sees Q2 sales drop 8%, continues with restructuring plan
Ericsson's Q2 profit drops 63% on weaker network sales
Alcatel-Lucent to post Q2 operating loss, will miss annual profit goal
Lawmaker says Huawei, ZTE may be getting Chinese subsidies