China's Huawei aims to double last year's record revenue by 2018

Reuters
A man looks at a Huawei mobile phone as he shops at an electronic market in Shanghai
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A man looks at a Huawei mobile phone as he shops at an electronic market in Shanghai January 22, 2013. REUTERS/Carlos Barria

By Yimou Lee and Paul Carsten

SHENZHEN/BEIJING (Reuters) - China's Huawei Technologies Co Ltd has targeted 2018 revenue almost double the record reaped last year when the company booked 34 percent profit growth and became the world's third-biggest smartphone manufacturer.

Huawei has been flooding emerging markets with low-priced smartphones and tapping advanced economies with high-end offerings to make up for slowing growth in its primary business of building mobile telephone networks.

Smartphones last year contributed the most to revenue growth in yuan terms and are likely to feature prominently in reaching a revenue target which translates as roughly 10 percent annual growth.

To reach that target, the company will have to improve on 2013 when revenue hit a record yet grew at a pace slower than Huawei's 10 percent goal primarily because overseas companies spent less on networks.

Huawei also missed its smartphone sales target as local peers Lenovo Group and ZTE Corp pursued similar strategies to close the gap with leaders Apple Inc and Samsung Electronics Co.

"In 2014, we are aiming our sales efforts at improving our branding image," Eric Xu, Huawei's rotating and current chief executive, said on Monday.

"At the same time, we are going to build our (smartphone) product portfolio in the mid-range and high level," Xu said after the unlisted company released audited earnings results.

In 2013, revenue hit a record 239 billion yuan ($38.47 billion), helping operating profit land within Huawei's guidance range, and pushing net profit up 34.4 percent to 21 billion yuan - its quickest profit growth in four years.

Revenue grew 18 percent in Huawei's consumer division, which includes smartphone manufacturing, and the company expects a similar rate of growth this year.

In the enterprise division, which builds private networks for companies and organizations, revenue grew 32 percent thanks to companies investing heavily in cloud and mobile computing.

Revenue in the carrier network business - which accounts for about 70 percent of overall income - grew just 4 percent. Huawei aims to double that to 8 percent this year as carriers increase investment in 4G, particularly in China.

Overall, Huawei targets revenue of $70 billion by 2018, or annual growth of about 10 percent, executives said at the press conference.

Growth was 8.6 percent last year rather than the targeted 10 percent, and smartphone shipments reached 52 million handsets instead of the 60 million handset goal.

"BUSINESS AS USUAL"

Huawei smartphone sales last year barely made a dent in the U.S., the second-biggest market, where lawmakers have flagged Chinese telecommunications equipment as potential security risks.

Earlier this month, the New York Times and Der Spiegel cited documents leaked by former U.S. security contractor Edward Snowden as saying the National Security Agency accessed Huawei's servers and obtained sensitive data.

After the latest reports, Huawei "maintained calm" and operated "business as usual", said Xu. "If the New York Times report is true, I think we will have known about this long ago."

One of the goals of the NSA operation was to find any connection between Huawei and the Chinese People's Liberation Army, according to a 2010 document cited by the Times.

"Nobody has ever said that Huawei has the capacity to spy on the U.S. network and things like that," said Xu. "For a business organization, no one would be so unwise as to do such a thing.

"The whole focus point of all the ongoing discussion is the concern that the Chinese government may leverage Huawei's equipment (for spying)," Xu said. "I think it will take a lot of effort to address (allegations that Huawei has the capacity to spy)." ($1 = 6.2122 Chinese Yuan)

(Editing by Christopher Cushing)

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