Huawei Technologies Co. Ltd. has (at last) issued its 2007 annual report, confirming its position as the fifth biggest telecom equipment vendor in the world with revenues of $12.56 billion for last year, up 48 percent from 2006.
And we're talking actual revenues here: The Chinese vendor often uses the value of signed contracts to publicly report its financial growth -- for 2007 it has previously announced "contract sales" of $16 billion -- but in its annual report it discloses its financials as audited by KPMG International "in accordance with IFRSs (International Financial Reporting Standards)."
Earlier this year we took an average ratio of revenues to contract sales from Huawei's previous annual reports -- it came to 73.4 percent -- and, using that ratio, estimated the firm's 2007 revenues would be about $11.7 billion. (See Huawei Sets Bumper Sales Target.)
But Huawei has beaten that average –- its 2007 revenues are equivalent to 78.5 percent of reported contract sales (see Table 1).
Its reported 2007 revenues put it well ahead of Nortel Networks Ltd. (NYSE/Toronto: NT - message board) to claim fifth spot in our updated global table of telecom equipment vendors (see Table 2).
For 2007, Huawei's gross margin was 33.9 percent (down from 36.2 percent in 2006); its operating margin was 7 percent (unchanged from 2006) for an operating profit of $879 million; and its net income was $674 million, 32 percent up from 2006's profit of $512 million (see Table 3).
So, while Huawei's revenues and the value of its contract awards are growing at a rapid pace, its operating margin is static (at 7 percent), its gross profit is down, and its net income is increasing at a slower pace than its revenues.
Here are some other statistics of note from Huawei's 2007 report:
Huawei ended 2007 with nearly $1.7 billion in "cash and cash equivalents," up from just more than $1 billion a year earlier.
It counts 35 of the world's Top 50 carriers as its customers.
35,000 Huawei staff are engaged in research and development -- that's 43 percent of the company's total global headcount of more than 81,000. The company says it invested 10 percent of its revenues ($1.26 billion) in R&D, with facilities in China, India, Europe, and the U.S.
By December 2007, Huawei had filed 26,880 patent applications since it began operations.
Of its $16 billion of contract sales in 2007, 72 percent came from non-domestic, or international, markets. Huawei claims that its growth (in terms of contract sales) in "developed markets such as Europe, the United States, and Japan" in 2007 was more than 150 percent.
Like other major vendors, Huawei is now aggressively targeting the professional services market. It has seven managed services centers around the world and claims to have signed 34 managed services contracts during 2007, with Vodafone, China Mobile Communications Corp. , Etisalat , MTN Group Ltd. , and Warid Telecom Pvt. Ltd. among those customers. It's a red-hot market, leading some to claim that market share is being gained from "silly pricing." (See Nokia Siemens CEO Slams 'Silly Pricing'.)
Huawei says it has deployed 100,000 "green" mobile base stations that, to date, have saved the equivalent of 170,000 tons of coal in power consumption.
It claims leadership in the MSAN (multiservice access node) market and top spot in the IP DSLAM market in the second half of 2007. (See Huawei Rivals AlcaLu for DSL Crown.)
Now, of course, the focus is on 2008. Huawei estimates its contract sales total will be as high as $23 billion this year, up nearly 44 percent compared with 2007. And with China set to upgrade its mobile networks to 3G, and other emerging markets turning to the Chinese vendor for goods, services, and support, Huawei looks set for a few more bumper years as well. (See Huawei Pumps Up Its APAC Biz, China to Get 3G – At Last!, and Reliance Borrows $750M for Huawei Gear.)
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