Every year, Huawei releases its annual report in the run up to its Global Analyst Summit (colloquially called “GAS” – by Huawei, that is) and then generally spends the first day of its conference reviewing the results. This year, as we all get our visa applications in order and start travel planning, Huawei’s annual report offers a glimpse of what we should be hearing from the vendor at its annual gathering.
My bet: While I’m sure there will be some management consulting-style marketing spin applied, the key takeaway for most of us will be that Huawei has officially settled into the reality of a mature market player. To be sure, it will point to impressive growth percentages from its enterprise and consumer businesses (32.4% and 17.8% YoY, respectively). However, the fact is that Huawei’s fastest growing business still barely represents one-twentieth of the vendor’s yearly bookings.
With respect to the vendor’s bread and butter business group – its carrier network group, which still accounts for 70% of company revenue – a parable comes to mind. I live in Austin, Texas, which is the self-proclaimed live music capital of the world. As the moniker implies, there are many opportunities for local musicians to play live on a given night. So much so that a good many artists, while making a comfortable living in Austin, can have the tendency to stay close to their comfort zone, sometimes at the expense of broader success. The locals call it “The Velvet Rut.”
In many ways, carrier networking has become Huawei’s “velvet rut.” Without a doubt, Huawei is one of the world’s most influential telecom equipment makers and it makes a nice living in this role. However, recent growth rates of 3%, 6% and 4% for 2011, 2013 and 2013, respectively, argue strongly that the days of double-digit growth for the company could be over.
To put this in perspective, remember that as recently as a few years ago Huawei predicted it would be a $100 billion a year company by 2020. That would take a serious string of double-digit growth years to achieve.
As the last several years of annual reports make clear, the vendor has not grown anywhere near the pace at which it needs to grow to fulfill this prophecy. Its fastest growing business (enterprise), once called out as the prime engine that would lead Huawei to the land of $100 billion in annual turnover, has not delivered as once hoped. And while its consumer business is doing well – the best of Huawei’s three divisions by some measures – its path to displacing Samsung or Apple seems to be a long road at best.
All this is to say that while many telecom equipment vendors would trade their financials for Huawei’s in the proverbial New York minute, the reality is that Huawei’s corporate messaging this year will likely be more sober. Not that that is a bad thing. With topics like SDN/NFV, the telco cloud and 5G networking all red hot and looking for market leaders to emerge, an older, wiser, more sophisticated Huawei is in good position to fill these roles. Undoubtedly, Huawei will be laying out is vision for how it will capitalize on these opportunities. The big question is: can these opportunities help the vendor to grow again at the double digit rates that its upper management in all likelihood still expects?