China's Huawei expects profit jump after reporting drop in 2011

Reuters News
Posted: Jan 04, 2013 3:09 AM
China's Huawei expects profit jump after reporting drop in 2011

By Lee Chyen Yee

HONG KONG (Reuters) - China's Huawei Technologies Co Ltd, the world's No.2 telecom equipment maker, expects a 2012 profit gain after reporting a sharp drop a year ago, thanks to new projects and increased sales in high-end mobile phone markets such as Japan.

Net profit is expected to be around $2.4 billion, rotating and acting Chief Executive Officer Guo Ping said in a New Year message to employees on Friday. That would be a rise of 29 percent from 11.6 billion yuan ($1.86 billion) in 2011, based on his forecast.

Revenue is expected to exceed $35 billion, Guo said. In 2011, sales rose 11.7 percent to 203.9 billion yuan, or about $32 billion.

Privately held Huawei and its crosstown rival ZTE Corp have been expanding their footprint in the global telecom equipment and mobile phone sectors over the past few years.

While Huawei has boosted sales and gained market share in Europe, Africa and Asia, it ran into a few obstacles last year in other markets such as the United States and Australia due to national security and cyber espionage concerns.

Slower telecom spending stemming from a weak global economy and stiff competition in the increasingly crowded mobile phone sector have also weighed on the outlook of equipment providers and handset manufacturers.

"We should devote our limited energy to specific business objectives, and avoid the impulse to expand business blindly," Guo said. "Managers who expand business blindly must be held accountable."

Last October, ZTE, the world's fourth-biggest maker of mobile phones and No.5 telecom equipment maker, reported its biggest quarterly loss since it was listed due to narrowing margins, project delays and accounting changes in China.

Guo did not provide a breakdown of the revenue figures by business segment. Huawei is expected to announce audited figures in the next few months, although no date has been set yet.

Rival Ericsson has yet to report its full-year figures, so it is unclear whether the Chinese company had surpassed the Swedish giant as the top telecom equipment maker in the world.

Huawei was founded in 1987 by Ren Zhengfei, a former People's Liberation Army officer. Huawei has denied repeatedly any links with the Chinese military and says it is a purely commercial enterprise.

In a message to employees a year earlier, Ren said Huawei had initiated a system that allows top executives to take turns acting as chief executive, paving the way for a smooth management handover when Ren eventually retires. ($1 = 6.2303 Chinese yuan)

(Reporting by Lee Chyen Yee; Editing by Ryan Woo)