- 1. NETWORK BUSINESS QUARTERLYSMHuaweiFourth Calendar Quarter
2010Fourth Fiscal Quarter 2010 Ended Dec. 31, 2010TBR OUTLOOK -
POSITIVE TBR SCORE (0-10 SCALE) 4.79Publish Date: March 21,
2011Author: Chris Antlitz ([email protected]), NBQ
AnalystContent Editor: Michael Sullivan-Trainor, NBQ Executive
Analyst TBRT E C H N O L O G Y B U S I N E S S R ES E AR C H , I N
C .
2. Contents TBRCompany Analysis Company Data Models3 Executive
Summary24 Income Statement7 Strategy Overview25 Balance
Sheet11Corporate SWOT Analysis26 Revenue Model14Financial Model
Strategy 27 Geographic Model17Go-to-Market & Product
Strategies28 Operating Expense Model18Alliance & Acquisition
Strategies29 Forecast Model19Geographic Analysis30 Financial
Graphs21Resource Management Strategy 33 Go-to-Market & Resource
Mgmt. Graphs22Future Outlook 34 Acquisitions Table 35 Strategic
Alliance and Partnerships Table 37 Product Announcement Table 40
Customer Deals Table 50 Facilities Table 52 Management Table 53
About TBR2 Huawei 4Q10 | Network Business Quarterly2011 Technology
Business Research, Inc. 3. Executive Summary TBRHuawei successfully
weathered the decline in Chinese spend for 3Grollout in 2010,
making up for it with solid execution in EMEATBR Position:Huawei is
striving to drive software and servicesTBRHUAWEI REVENUE BY REGION
$454revenue to maintain its lofty growth rate. $28,000 North TBR
estimates gross margin rose 40 basis points $24,000
$408$9,912America Revenue in Millions from 2009 to 40%, as sales
mix moved toward $20,000 $231EMEA higher-margin software, services
and next- $6,500 $16,000$6,040 $1,820 generation infrastructure.
$146 $923CALA $12,000 $4,399 $3,843 $6,014$1,539 The device
business rebounded sharply fromAPAC (ex-$8,000$900 2009 on strong
unit shipments and a more $5,743 China) $3,799 $10,147$9,800
favorable mix skewed toward smartphones. $4,000$4,518 China $3,595
Huawei benefited from the revival in optical $02007 20082009 2010
Est. transport spend, but TBR believes the vendor SOURCE: TBR
ESTIMATES AND HUAWEI trailed Alcatel-Lucent and Ciena in the space
in 2010. We believe Huawei is exercising its generousHuaweis
Corporate Strategies credit lines with Chinese banks to offer
attractive financing to cash-strapped operators in Execute on
three-pronged security plan in U.S. to developing countries. As
such, TBR estimates assuage government fears Huawei will grow sales
faster than peers in CALA Triple terminal sales within three to
five years by and Africa, where access to capital is scarce,
manufacturing and bringing to market low-cost especially for
large-scale deployments.smartphones and tablets sporting the
Android OS Huawei is using resource localization to establish
Establish leadership position in 4G, particularly TD-LTE hubs in
key markets and make customers more Invest in software and services
assets to better comfortable using a foreign vendor for their
compete against Ericsson, Alcatel-Lucent, and Nokia network needs.
Siemens3 Huawei 4Q10 | Network Business Quarterly 2011 Technology
Business Research, Inc. 4. Executive Summary TBRThough Huawei has
won the largest number of 4G contracts thus far,rivals
Alcatel-Lucent and Ericssons LTE contracts are worth moreQuarterly
Segment Performance 2010GrowthSegment Key Changes &
DriversRevenue Trends to MonitorY/Y Estimate Huaweis launch of a
SingleRAN thatHuawei is ahead of rivals in number supports both
TD-LTE and WiMAX could beof 4G deals signed, but the value of a hot
seller for WiMAX operators looking forthose deals pales in
comparison to $8.5a relatively inexpensive way to migrate
toWirelessthe lucrative LTE contracts won bybillion34.3% LTE. Some
examples include Clearwire andAlcatel-Lucent and Ericsson for Yota.
This could also expand the TD-LTEAT&T, Verizon and other Tier 1
ecosystem, which is currently running theoperators. FDD-LTE
iteration of the 4G technology.Huawei continued to grow
FTTxdeployments with numerous deals. Huawei has strong FTTx
offerings andIn 2H10 alone, Huawei won twoprovides reliable,
quality accessFixed deals for FTTH deployments, one$2 billion
27.7%equipment at better prices thanwith Telekom Brunei Berhad
incompetitors.Brunei and the other with Qtel in Huawei also leads
in GPON and EPON.Qatar. Huawei will benefit from BTs decision toThe
largest optical deals Huawei increase fiber investment by 1 billion
($1.5signed in 2H10 were with China $5.8 OpticalMobile and PCCW for
40G billion12.9%billion) through 2015, as the vendor has been a key
supplier of optical access andsolutions. transmission equipment to
BT since 2008.4 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 5. Executive SummaryTBRData was
the fastest-growing segment in 2010, as operators boostedcapacity
on their networksQuarterly Segment Performance 2010GrowthSegment
Key Changes & DriversRevenue Trends to MonitorY/Y Estimate
Demand for routers was strong in 2010, exemplified by MegaFons
purchase of an Operators are stressing efficiency on a IP/MPLS
solution from Huawei in cost per bit basis, as revenue derived
October.$2.4from data is growing at a far slower
rateDatabillion57.1% than data usage. This trend bodes well
Operators are allocating a larger portion of their capex budgets to
IP to bulk up for sales of Huaweis SingleRAN, network capacity to
contend with rising backhaul and IP solutions. data usage. Huawei
realized strong growth across rollout, maintenance, professional
andHuawei is bulking up its services arm to managed services. Being
selected forbetter compete against heavyweightsServices end-to-end
network deployments and/or Ericsson, Alcatel-Lucent and Nokia
upgrades is helping Huawei drive$4.9& billion34.5%Siemens for
lucrative outsourcingSoftware incremental growth in services.
contracts; however, it will be some time Traction in software
remains elusive, before Huawei can undertake a mega- though Huawei
is investing aggressively services deal. in its portfolio. IDEOS
will be offered by carriers and IDEOS smartphone series launched in
$4.5retailers in more than 70 countries inTerminalsSeptember and
sold 1 million units in firstbillion21.6% 2011, helping Huawei
quickly gain two months. market share.5Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 6.
Executive SummaryTBRHuaweis balance sheet is stretched compared to
peers, reflecting liberalcredit policies, inefficient inventory
management and a rising debt load CALENDAR QUARTER RESULTSTBR
SCORING SUMMARY:TBRCompanyAverage in Standard 4Q09 1Q10 2Q10 3Q10
4Q10FINANCIAL METRICSTBR ScoreFigure Class Deviation/2Fi na nci a l
Model Stra tegy: 5.67 5.55 5.64 5.74 5.80Revenue Growth Yea
r-to-Yea r8.44 28.3%9.0%5.6%Go-to-Ma rket & Servi ces Stra tegi
es : 3.27 3.21 3.35 3.51 3.35 Revenue/Empl oyee3.53 $ 229,694 $
383,236$104,419Res ource Ma na gement Stra tegy:5.29 4.92 4.93 5.27
5.24 Gros s Ma rgi n5.52 40.0% 37.3%5.2%TOTAL AVERAGE TBR SCORE:
4.74 4.56 4.64 4.84 4.79 SG&A a s % of Sa l es4.74 17.9%
17.3%2.2%R&D a s % of Sa l es 6.65 10.0% 13.1%1.9%Huawei has
the weakest days sales outstanding Opera ting Ma rgi n6.27
11.9%6.4%4.3%metric among its peers due to its liberal creditDa ys
Ca s h Outs tandi ng 3.9870.60115.04 43.59Total As s et
Turns6.991.160.910.13policies. Huawei routinely accepts IOUs
fromCurrent Ra tio 3.781.481.760.23customers to boost sales and
encourageDebt/As s ets2.160.690.520.06investment. We believe this
practice couldReturn on As s ets 8.11 14.2%5.6%2.8%weaken Huaweis
balance sheet if cash-Return on Equi ty9.42 45.6% 13.3%7.3%strapped
operators struggle to pay back TOTAL AVERAGE TBR
SCORE5.80outstanding debt. CompanyAverage inStandard
KeyGO-TO-MARKET & SERVICES METRICSTBR
ScoreFigureClassDeviation/2Network/Comm. Equi pment Ma rket Sha
re5.37 13.7% 12.2% 3.9% Represents an area where Huawei is Mobi l e
Phone Ma rket Sha re3.662.2% 10.2% 6.0% currently challenged versus
peers. Da ys Sa l es Outs tandi ng1.01 154.9680.19 18.74 Represents
an area where Huawei is TOTAL AVERAGE TBR SCORE3.35 outperforming
its peers. Represents an area where Huawei isCompanyAverage
inStandard neither significantly outperforming norRESOURCE
MANAGEMENT METRICSTBR ScoreFigureClassDeviation/2 underperforming
its peers. Inventory Turns /Yea r 3.996.218.13 1.90Fi xed As s et
Turns /Yea r6.4819.1114.59 3.04 VENDOR PERFORMANCE COMPARED TO
PEERS IN TBRS NETWORKTOTAL AVERAGE TBR SCORE5.24 BUSINESS QUARTERLY
VENDOR BENCHMARK 6 Huawei 4Q10 | Network Business Quarterly 2011
Technology Business Research, Inc. 7. Strategy OverviewTBRHuaweis
three-pronged security strategy is a good first step to
reducebarriers to expansion in the United States marketFunction Key
Strategies TBR Assessment Build on initial success Huawei has yet
to land an equipment contract with a Tier 1 in North America to
operator in the United States, though the vendor is
findingOverallbecome a key suppliersuccess among Tier 2 and 3
companies. to network operators With security clearance in hand,
Huawei can realize the full Grow business in India potential of its
extensive resources in India, which include a by localizing
presence skilled local workforce and domestic manufacturing and
R&Dassets. Huaweis plan includes establishing a national
security committee Employ three-prongedheaded by Huawei CTO Matt
Bross, using third-party test labs to security strategy to check
Huaweis source code, and using U.S. citizens to deliver and allay
U.S. concernsinstall Huawei equipment. Grow sales 20% in 2010
Huawei exceeded its sales target for 2010 by $1.8 billion, and TBR
by focusing on estimates broad sales growth in all of Huaweis
operatingFinancialinternational expansionsegments. TBR estimates
Huawei boosted its R&D spend to 10% of revenuein 2010 after
spending just under 9% of sales in the previous two Invest 10% of
revenue years. The jump reflects confidence in the global economic
in R&Drecovery and a strong push into services and software.
Huawei isalso investing heavily in TD-LTE.7Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 8.
Strategy OverviewTBRHuawei is investing heavily in North America
and India to support growth Function Key StrategiesTBR Assessment
Huawei won the largest share of the LTE and WiMAX contractsawarded
in 2010 and is positioning itself to become a leader in Establish
leadership Go-to- TD-LTE, the 4G technology of choice for Chinese
operators. The position in 4G (WiMAX Market vendor aims to double
its commercial LTE contracts from 18 in and LTE)2010 to 36 in 2011
and expects LTE-related revenue will becomea meaningful contributor
to overall revenue by 2014. Selling low-cost Android powered
devices via carriers will helpHuawei quickly gain market share in
smartphones and tablets. Leverage Android toiPad and Xoom are not
affordable by the general population of gain traction in most
countries and offerings by Samsung and LG seek to capture
smartphone and tabletthe midmarket. This leaves the low tier up for
grabs, a space marketsHuawei thrives in due to its low-cost
operating structure andresistance to pursuing expensive advertising
programs. Huawei opened an R&D center in Ottawa in August the
vendors Establish R&D centers insecond R&D facility in
North America. This base of operations in R&D and strategic
cities toCanada will help Huawei develop closer ties with its local
Deliveryleverage local talentcustomers, including BCE, SaskTel and
TELUS as well as help the Strategypoolscompany enter the good
graces of the Canadian government. $2 billion investment in Using a
localization strategy, Huawei is creating a stronghold in India
will improve India while improving its reputation with the Indian
government. prospects in the country8Huawei 4Q10 | Network Business
Quarterly 2011 Technology Business Research, Inc. 9. Strategy
Overview TBRLocalization is central to Huaweis India strategy a
move that will helpimprove its reputation with government officials
while saving moneyTBR Assessment of Huaweis Resource Management
Strategy With security clearances in hand and 3G deals secured,
Huawei unveiled an India investment plan worth $2 billion over the
next five years. The strategy is to quickly build a standalone base
of operations in India. Huawei will leverage the talent pool and
localize service delivery and equipment manufacturing to establish
a stronghold in the country, which will alleviateHuaweis government
fears and help Huawei keep costs down.$2 billion A manufacturing
hub will be built near Chennai for $500 million. It will produce
networkinvestment showsinfrastructure equipment for India and
export to neighboring countries.the vendor views The existing
R&D center in Bangalore will expand to house 3,000 engineers,
up from thethe Indian marketcurrent 2,000.as a strategic,long-term
Partnerships with Indian IT firms will be funded to better approach
and offeropportunity differentiated solutions to the market.
R&D budgets will rise to take advantage of the highly educated
talent pool. Training centers will be established to coach new
hires and channel partners. These investments will boost Huaweis
India headcount from 6,000 at the end of 2010 to over 10,000 by the
end of 2011, with more than 60% to be local hires.9 Huawei 4Q10 |
Network Business Quarterly 2011 Technology Business Research, Inc.
10. Strategy OverviewTBRHuawei will come to dominate the low-end
smartphone and tabletmarkets in 2011 TBR Assessment of Huaweis
Go-to-Market Strategy Huawei is clearly focused on locking up the
low-tier smartphone and tablet markets. Thestrategy is to
mass-produce a limited number of models that are widely affordable
andappealing to many demographics. Huawei is able to sell its
devices at a discount Bringing Android-compared to rival offerings
because of its low-cost operating structure and resistance to
poweredexpensive advertising campaigns. Instead, Huawei prefers to
let carriers and retailers smartphones andhandle the marketing
portion and sweeps those cost savings to the bottom line, which
tablets at a fractionhelps protect margins. of the cost of rivals
Huawei is also making inroads to big box retail stores like Best
Buy and Wal-Mart. The offerings to U.S.popularity of Android
smartphones and tablets is pushing retailers to offer the widest
shores will resonate and most competitive selection of mobile
devices. with mass market consumers, helping TBR believes ZTE will
be Huaweis only significant competitor in the low-end space. make
Huawei aApple clearly owns the high end and RIM, Samsung, Nokia,
Motorola and others are all household name jockeying to grab share
in the mid- to high-end segments. With competitors focused on
balancing ASP and volume, Huawei is able to move in andquickly
ramp-up unit shipments; however, TBR forecasts Huawei Device to
have anexcellent year in 2011.10Huawei 4Q10 | Network Business
Quarterly2011 Technology Business Research, Inc. 11. Corporate SWOT
Analysis TBRNokia Siemens is Huaweis biggest threat from the West,
as it iswilling to compete against the Chinese on price to win
market share Strengths Opportunities Leader in 4G technologies by
number of contracts Supply TD-LTE market SingleRAN platform is a
key differentiator for Use strategic partnerships to build
expertise and winning contracts in developed regionsenter new
markets Able to provide vendor-linked financing through Utilize
Service Delivery Platform to establish Web ties to state-run banks
in China2.0 leadership Low operating costs support low-cost pricing
Establish a foothold in the North American market strategy
Extensive installed base of Tier 2 & 3 telecom operators in
emerging markets WeaknessesThreats Need to add capabilities fast to
match incumbent Nokia Siemens prioritizing market share gains over
NEPsprofitability puts downward pressure on contract Increasing
size brings a challenge to maintaining pricing historical
efficiency Reshuffling of Chinese telecom industry could Relatively
small managed services basedampen Huaweis growth prospects in home
market Ties to Chinese government could limit international
investment opportunities Tighter monetary policy by China could
limit Huaweis domestic growth Lack of United States presence11
Huawei 4Q10 | Network Business Quarterly2011 Technology Business
Research, Inc. 12. Corporate SWOT AnalysisTBRThe partnership with
Sequans and the unveiling of a dual-mode TD-LTE/WiMAX SingleRAN
base station show Huawei is serious about TD-LTEOpportunity: Supply
TD-LTE market Huawei is positioning itself to become a leader in
TD-LTE, the iteration selected by Chinese operators for their 4G
migration. In 4Q10, Huawei partnered with Sequans Communications to
develop and commercialize TD-LTE hardware for the global
marketplace and unveiled a new version of SingleRAN that supports
both WiMAX and TD-LTE. Unlike FDD-LTE, which uses paired spectrum,
TD-LTE uses unpaired spectrum channels.Huawei standsThough TD-LTE
is slightly less efficient at transmitting data than FDD-LTE, the
version givesto be a keyoperators greater flexibility to use
varying frequencies when operating their 4G network.beneficiary of
Unpaired spectrum is also much less expensive than paired spectrum,
which incentivizes itsTD-LTE-related use by
operators.contracts,especially as A push to develop TD-LTE in China
has helped the technology catch up with FDD-LTE, makingWesternit a
contender for commercial deployment. While European and North
American operatorsvendors focusare likely to go with FDD-LTE, TBR
believes TD-LTE will be the standard of choice in China,on the FDD
Russia and India, where local vendors like Huawei and rival ZTE
will push their version of theversion of the technology and where
operators can find meaningful cost savings in the use of
unpairedtechnology spectrum. Though the Chinese government has been
quiet regarding 4G license allocation, the big three Chinese telcos
have all begun formulating their 4G ambitions. TD-LTE trials are
slated to begin in 2011 and both Huawei and ZTE stand to be key
beneficiaries of this next investment cycle to 4G in APAC,
especially since Western vendors are almost completely focused on
FDD- LTE to service their core customers.12 Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 13.
Corporate SWOT Analysis TBRHuawei is at a crossroads, as its
historical focus on network deploymentmust shift to software and
services to further grow Tier 1 accountsWeakness: Need to add
capabilities fast to match incumbent NEPs Huawei is becoming a
mature company. Though sales were strong in 2010, TBR
believesHuaweis growth rate will moderate in the coming years as it
becomes more difficult to growrevenue off a larger base. Huawei has
built its empire on the mantra of fast deployment of low-cost,
high-qualityproducts. While this strategy has been extremely
successful thus far, the company now findsitself at a crossroads
and must adapt to be successful in the future. With India
representing the last large market for new network deployment,
long-termrevenue growth will come primarily from services and
software two areas Huawei lagsHuawei may pursue compared to
incumbent NEPs like Alcatel-Lucent, Ericsson and Nokia
Siemens.alliances and/or Though Huawei is making strides in its
services and software capabilities and offerings,acquisitions
toaddress its relativemuch work remains to be done in cultivating
customer relationships and building outweakness in software
platforms and multimedia solutions that service providers will feel
comfortableservices andadopting in their back-office
systems.software In services, Huawei is making progress in
product-attached maintenance but lags inmultivendor, primarily due
to a relative lack of expertise in dealing with rivals
systems.Professional services is another weak area for Huawei, one
that includes a range ofcommoditized to highly specialized
services. Huawei is trying to address the commoditizedarea with its
new iCare solution. In software, Huawei unveiled its Digital
Shopping Mall in response to the popularity ofmobile applications;
however, Huawei lags behind Alcatel-Lucent in applications,
particularlyin enablement, and lags Ericsson in video all important
spaces that will be long-termgrowth drivers.13Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 14.
Financial Model StrategyTBRGross margin improved in 2010 on
favorable sales mix, but 2011 willpressure margins as 3G rollout
activity ramps up in IndiaRevenue Huawei blew past its guidance of
$26.2 billion for TBR HUAWEI PROFITABILITY AND GROWTH2010,
attaining $28 billion in revenue, up 28.3% from $30,00060%2009.
$25,00050% In Millions USD Given that Huawei historically issues
guidance that is$20,000 40%in line with actual figures, this
outperformance$15,000 30%speaks to the underlying strength of the
service$10,000provider industry. $5,00020% $010%Expense200620072008
2009 2010 Est. TBR believes Huawei spent $2.8 billion on R&D
inTotal Revenue Gross ProfitOperating ProfitYear-to-Year Revenue
Growth2010, matching the companys historical target spend SOURCE:
TBR ESTIMATES AND HUAWEIof 10% of total revenue. SG&A grew an
estimated 43.4% year-to-year asHuawei beefed up advertising and
sales departmentsTBRGROSS MARGIN & OPERATING MARGINto meet
strong demand in developing regions. 50% 40.0% 36.2%
38.2%39.7%39.6%Margin 40% Gross margin rose 40 basis points from
2009 to 40% 30%as sales mix skewed more toward
higher-marginsoftware, services and next-generation hardware.
20%12.9%14.1% 11.9%7.3% 9.7% Operating margin fell 230 basis points
year-to-year to 10%11.9%, as Huawei boosted spending on R&D and
0%SG&A to fund innovation in areas such as TD-LTE and 2006 2007
20082009 2010 Est.applications as well as better align its
salesGROSS MARGINOPERATING MARGINSOURCE: TBR ESTIMATES AND
HUAWEIdepartment with market demand.14Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 15.
Financial Model Strategy TBR TBR believes Huawei saw strong growth
in all of its operating segments in 2010 Revenue Performance
Revenue Drivers 2010 Est. Revenue: $28 billion, +28.3% Y/Y TBR
HUAWEI REVENUE BY SEGMENT$28,000Handset $4,500$24,000Service &
Revenue grew across Huaweis portfolio, reflectingRevenue in
Millions$20,000$3,700 $4,900 Software strong operators demand for
infrastructure, $2,400 Data services and
software.$16,000$3,790$3,644$12,000$2,792$1,527$5,750 Optical
Growth returned to the terminal division in 2010,$2,106$1,965
$1,265$5,094 $1,950 Fixed aided by a push into higher-value devices
such as $8,000 $1,200 $3,176$2,190 $1,446$1,527smartphones. $4,000
$1,400 $8,500 Wireless $5,602$6,328$3,980$02007 200820092010
Est.SOURCE: TBR ESTIMATES AND HUAWEI 2011 Revenue and Growth
Outlook 2011 is shaping up to be a good year for HuaweiTBR HUAWEI
2010 SEGMENT REVENUE GROWTHTBRand its rivals. Growth is
broad-based, and demand$28,000 is being fueled by exponential rises
in data trafficRevenue (in $ Millions) $800$27,000$26,000
$1,256globally.$873$25,000$423$656 $28,000 India will be a key
driver of infrastructure revenue$24,000$23,000$2,172in 2011, but
will pressure overall margins.$22,000$21,821 Device sales growth
will accelerate in 2011 as the$21,000 distribution of low-cost
Android smartphones and tablets expand to reach the mass market in
developed markets.SOURCE: TBR ESTIMATES AND HUAWEI15 Huawei 4Q10 |
Network Business Quarterly 2011 Technology Business Research, Inc.
16. Financial Model Strategy TBRHuawei is investing heavily in
sales and support staff and intellectualproperty to diversify and
grow into other areas, such as software Expense PerformanceExpense
Segments & Strategies 2010 Est. Total OPEX: $24.6 billion,
+31.7% Y/YTBRTBRHUAWEI OPERATING EXPENSES$25,000 $2,800Cost
of$20,000 $5,000 RevenueCost of revenue grew 27.4% from 2009,
$1,953$1,511slower than revenue, as mix shifted towardIn $
Millions$15,000 $1,284$3,236 $3,538$16.8higher-margin products and
services.$10,000$850 $2,350 $16,800 billion $10,890 $13,188
$1,502$5,000 $7,937 $5,424$020062007200820092010 Est.Huawei is
hiring aggressively in key growth Research &
DevelopmentSG&ACost of Revenue SG&A markets, particularly
India, Europe and theSOURCE: TBR ESTIMATES AND HUAWEI $5 billion
Middle East, to align its sales and supportTBRdepartments with the
influx of business.TBR HUAWEI OPEX AS A PERCENTAGE OF
REVENUE70%60%50%40%Huawei is investing heavily in TD-LTE (the30%
R&Dversion of LTE that will likely be rolled out20%10%$2.8 by
the big three Chinese operators) as well0% billionas applications,
an area in which Huawei 20062007 2008 20092010 Est.has historically
had minimal involvement. Cost of RevenueSG&AResearch &
DevelopmentSOURCE: TBR ESTIMATES AND HUAWEI16 Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 17.
Go-to-Market & Product StrategiesTBRHuawei is innovating in all
major segments, hoping to become a one-stopshop for all the needs
of service providers and their end-usersTelecom Network
Infrastructure Application & Software In its push to become an
integral player in the applications space,Huawei launched the Any
Connection MobileHuawei launched its Digital Shopping Mall (DSM) in
October. TheBroadband Solution (MBB), which helps operatorsMall is
a platform that aggregates and delivers apps to anyusing HSPA
seamlessly migrate to LTE. Many operators Internet device. On
launch, the store contained 80,000 appsworldwide are upgrading
their HSPA networks to ranging from music to e-books to video. App
revenue is splitHSPA+ to deliver higher speeds while waiting for
the 70:30, with 70% going to the developers and 30% to the
operatorLTE ecosystem to mature. The MBB solution givessupporting
the mobile device. Alcatel-Lucent has similar offeringsoperators an
opportunity to prepare for an eventualin this space and Huaweis
entrance poses a sizable threat,move to LTE while adding capacity
to their network.especially as it is compatible with all major
smartphone operating systems, including Symbian, RIM and
Android.Professional ServicesDevices Android is central to Huaweis
smartphone and tablet strategy. iCare is a professional services
solution that assists Using Googles open source OS rather than a
homegrown OSservice providers in the planning, evaluation andhelps
Huawei save money on software and deliver more valueoptimization of
IP, optical, microwave and FTTxon the hardware portion of the
device.networks. This packaged offering shows Huawei isdetermined
to become more involved in services. Huawei launched its IDEOS
series in September 2010. Priced between $100-$200 unsubsidized and
free from some carriers Huawei has become a major player in
managedsubsidized, these smartphones are affordable and appeal to
aservices in India, challenging Alcatel-Lucent for thelarge
demographic in not only the U.S. and Europe, but also inNo. 3 spot
in provider by revenue; however, Huawei emerging markets, where
smartphones are in high demand butwill not pose a major threat to
Ericsson and NSN, as most models are too expensive for the general
population.Indian operators tend to award their equipmentsuppliers
with managed services contracts rather Huawei reported 1 million
IDEOS series smartphones sold in thethan seek outside providers.
first two months of launch and that IDEOS devices are available in
over 70 countries.17 Huawei 4Q10 | Network Business Quarterly 2011
Technology Business Research, Inc. 18. Alliance & Acquisition
StrategiesTBRCanada will act as a launchpad for Huaweis North
American ambitionsTBR Assessment of Huaweis Alliance &
Acquisition Strategy Huawei is making major investments in North
America as it tries to break into the United States market. With
the U.S. government blocking Huaweis every move stateside, the
vendor is investing heavily in Canada to prove it has no ill
intentions. So far, the Canadian government has been supportive of
Huaweis North American activities. In November, Huawei announced it
would devote $67 million over five years to the expansion of its
main North American R&D center in Ottawa. In stark contrast to
the U.S. government, the province of Ontario is providing Huawei
with a $6.5 million grant to put toward the expansion. To further
increase its Canadian presence, Huawei partnered with two of
Canadas largestHuawei makes telecommunications companies, Telus and
Bell Canada. In separate deals, Huawei and the telecoms agreed to
establish joint innovation centers in Canada. Huawei has had a
strong relationship with bothseveral movesoperators since they gave
the company its first major North American infrastructure deals in
2008.in Canada andwill retrench Huawei has clearly set itself up
for a long-term push into North America. In January, Huawei opened
itsfor anothernew Canadian headquarters outside of Toronto, moving
its sales and marketing groups into the building and stressing a
new focus on cloud computing. Cloud computing is poised to become
thepush into themajor initiative behind Huaweis North American
strategy.United States What the combination of these moves will do
to quell the U.S. governments concerns is unclear. In the short
term, there are no indications of decreased hostility on the part
of the government, with officials forcing Huawei to divest the May
2010 3Leaf acquisition in March. Huawei will likely not be allowed
to make significant acquisitions or win large infrastructure supply
agreements in the United States this year, but establishing a
foundation in Canada should prove worthwhile. With its ties to the
Chinese military and limited history on the continent, government
officials have rebuffed Huaweis advances. As Huawei builds its
reputation in Canada and among small service providers in the
United States, the U.S. government may soften its negative view of
the company.18 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 19. Geographic
AnalysisTBRHuaweis focus on international expansion cost it some
ground in China,as Alcatel-Lucent, Ericsson and Nokia Siemens all
locked up large dealsQuarterly Segment Performance2010 Growth Geo
Key Deals & DriversRevenue Trends to Monitor Y/YEstimate In
November, Huawei was selected to upgrade China Mobiles 10G backbone
network to 40G. TBR estimates absolute capexspend by incumbent
Chinese Surprisingly, Huawei was sidelined in its home telcos will
continue to decline market in 2010 while Alcatel-Lucent, Ericsson
andthrough 2012 as spending shifts Nokia Siemens all landed
lucrative frame from network buildouts to less agreements and
services contracts with leading $9.8capital-intensive services and
China3.4% operators China Mobile, China Unicom and
Chinabillionsoftware upgrades. Telecom. Chinese telcos will trial
TD-LTE in Poor performance in China suggests Huawei was2011, but
commercial overly focused on growing its share of the deployments
are not expected international pie rather than maintaining its
market for at least another year. share in China. Deals inked in
September with Bharti Airtel, MTS India sales bottomed out in 2010.
APACand Tata began to ramp up in 4Q10, but will notTBR expects
India to be a key become a major contributor to revenue until 2011.
$6(ex-56.5% contributor to Huaweis top-line billion China) APAC
growth was fueled by deals with operators ingrowth in 2011 as 3G
networks are Cambodia, Malaysia and Bangladesh. deployed across the
country. TBR HUAWEI GEOGRAPHIC REVENUE FISCAL YEAR20042005
200620072008 2009 2010 Est. China73.0% 60.0%34.7% 28.0%
25.0%46.5%35.0% International27.0% 40.0%65.3% 72.0% 75.0%53.5%65.0%
SOURCE: TBR ESTIMATES AND HUAWEI 19 Huawei 4Q10 | Network Business
Quarterly 2011 Technology Business Research, Inc. 20. Geographic
AnalysisTBRSome European operators are becoming comfortable using
Huawei as anexclusive provider of all their network needs, rather
than just portionsQuarterly Segment Performance2010 Growth Geo Key
Deals & DriversRevenue Trends to Monitor Y/YEstimate Canada is
the driver of North American Huaweis opportunities with U.S. Tier
1revenue, while deal flow in the Unitedoperators will likely be
limited to handsetsStates remains weak due to government due to
regulatory barriers, but theroadblocks. vendors prospects for Tier
2 and cable North$454operator contracts are bright. Huawei still
managed to win several11.3%Americamilliondeals in the U.S. in 2010
with Tier 2 & 3 TBR also expects Huaweis presence in theservice
providers; its terminals aresmartphone and tablet markets to pick
upincreasingly offered by the top six after the companys release of
a series ofwireless operators. low-cost Android devices. Huawei
landed three end-to-end 4G MEA will be challenged as uprisings
acrosscontracts in 4Q10 with operators across the region cause some
operators to rein inEurope, including T-Mobile in Austria,capex
spending.Datame Oy in Finland and Aero2 in This revelation will
hamper plans byPoland. $9.9Huawei, Ericsson and Alcatel-Lucent to
EMEA52.5% These 4G deals show operators arebillionincrease
involvement in the Middle East,becoming more comfortable withwhich
holds much promise for bothHuawei and entrusting the vendor with
network upgrades and greenfieldall aspects of deployment, rather
thandeployments on the service provider andjust bits and pieces.
enterprise space.Operators in Latin America areHuawei is
well-positioned in CALA and$1.8aggressively bulking up capacity on
their CALA has a strategic advantage thanks to its97.1%
billionfixed and mobile networks to prepare forcredit lines from
Chinese banks.increased broadband usage.20 Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 21.
Resource Management Strategy TBRHuawei is expanding its
international presence to support existingoperations and capitalize
on future opportunities HuaweisInvestments/R&D Focus Worldwide
Operations Huaweis failure to keep 3Leaf assets upon U.S.government
review reflects the companys ongoing Huawei opened its Canadian HQ
in Markham,struggle to expand its presence in the United
States.Ontario in January and plans to spend $67 million onHuawei
had purchased 3Leaf in May 2010 for R&D in the country over the
next five years. Of$2 million, including the firms virtualization
andHuaweis estimated 1,500 employees in Northserver
patents.America, 500 are based in Canada. Failure to win part of a
Sprint supply contract led Huawei will gain leverage in the United
States byHuawei to scale back its partnership with Amerilink.
becoming a strong player in the neighboringBoth companies continue
to work together on jointCanadian telecom equipment market. The
vendorssales opportunities in the United States, but thestrategy is
to use channel partners and referencesecure delivery program has
been dissolved.contracts to penetrate new customer
accounts.Personnel Changes TBR ANNUAL REVENUE PER EMPLOYEE Huawei
ended 2010 with 110,000 employees, up$250$23015,000, or 15.8%,
year-to-year. Revenue In Thousands$225 $207 Chinese headcount fell
13% in 2010 to 59,000 due to$200the relocation of employees to
Europe and other$171countries across APAC, particularly
India.$175$159 Huawei hired former CTO of Nortel John Roese to $150
$139lead its North American R&D team. Roese has $125worked for
several well-known U.S. tech firms and is$100expected to help
Huawei improve its image among2005 20062007 2008 2009regulators in
North America.SOURCE: TBR AND HUAWEI21Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 22.
Future Outlook TBRIndia will be a key driver of revenue growth in
2011 for most vendors as3G is deployed, but margins will be
pressured due to weak pricingTBR Outlook Operators will have to
adjust their business models to match the shift from a
voice-centric environment to a data-centric environment. Tiered
data plans will become commonplace to better monetize bandwidth,
while investment in RAN modernization, backhaul, IP, HSPA+ and LTE
will gain momentum as operators seek to scale capacity at a lower
cost per bit and improve speeds. Though component shortages are
easing, access to parts continues to be a headache for not only
Industrynetwork vendors, but also handset and other device
manufacturers. This challenge has created sizable backlogs for
equipment suppliers and will need to be filled in 2011. Component
supplies could tighten further following the disaster in Japan as
the country is a major manufacturer and exporter of many critical
electronic parts that go into a wide array of network
infrastructure equipment and end-user electronic devices. India
will be a key revenue driver in 2011, as all operators with 3G
licenses had awarded rollout contracts by the end of 2010, but the
weak pricing environment will pressure gross margins. Ericssons
purchase of Nortels wireless assets and Nokia Siemens buyout of
Motorolas wireless business have solidified both vendors stakes in
North America. TBR believes the altered Competitors competitive
landscape in North America will make it more difficult for
marginalized players like Huawei to win business. Huawei will build
a good reputation in Canada by working closely with operators,
employing locally, and investing in its new R&D center in
Ottawa. The hope is that good relations with the Company Canadian
people will help assuage government fears about Huawei selling its
products in the StrategyUnited States. Huawei is bulking up its
services and applications businesses to better compete with its
Western rivals and drive margin growth.22 Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 23.
Future Outlook TBRHuawei will likely grow faster than its industry
in 2011 as its strategy togrow market share and enter higher-margin
areas continues to bear fruitTBR Outlook Revenue will grow faster
than the network infrastructure industry, as Huawei continues to
wincontracts and take market share in developed markets like
Western Europe and Canada. Gross margin will be pressured as 3G
rollout activity in India ramps up, but better mix in
Financialdeveloped markets should offset most of this decline.
SG&A will trend higher as a percentage of revenue as Huawei
builds out its sales and supportstaff in developed markets. Huawei
will push its SingleRAN platform as a cost- and energy-efficient
solution that can helpoperators more easily converge their 2G, 3G
and, increasingly, 4G network assets. Huawei will fine-tune its
TD-LTE solution and bring it to market in 2011 just in time for
Chinese Go-to-Marketoperators to begin trials. Huawei will focus on
winning small portions of contracts with new customers to
establishrelationships and position the company for a greater share
of future contracts. Huawei will focus on building out
manufacturing, R&D and support facilities in India to
addressIndian concerns and take advantage of the countrys
relatively low labor costs. Resource Huawei will also beef up
R&D facilities and sales & marketing staff in North America
as the Management company prepares for rapid expansion in Canada
and the United States. Localization will remain integral to Huaweis
strategy of tapping new talent pools and rapidlyexpanding its
international operations.23 Huawei 4Q10 | Network Business
Quarterly2011 Technology Business Research, Inc. 24. Appendix
Income Statement TBR HUAWEI TECHNOLOGIES CORPORATION Consolidated
Income Statement (i n $ Thous a nds ) TBR CALENDAR YEAR2004
200520062007 200820092010 Est. FISCAL YEAR2004 200520062007
200820092010 Est. Revenue$ 3,826,687$ 5,981,542 $ 8,503,897 $
12,840,113$ 18,070,917$ 21,820,963 $ 28,000,000 Cost of
Sales1,918,5493,559,366 5,424,0117,936,73210,890,00213,188,406
16,800,000 Gross Profit 1,908,1382,422,176 3,079,8864,903,381
7,180,916 8,632,557 11,200,000 R&D487,000588,000 850,390
1,284,011 1,510,8531,952,8622,800,000 SG&A 741,3051,013,656
1,502,472 2,349,741 3,235,8713,538,1355,000,000 Total Operating
Expenses 1,228,3051,601,656 2,352,862 3,577,867
4,746,7245,490,9977,800,000 Other Operating Income/Loss 17,001
30,091 106,02977,65596,692 59,728 78,025 Operating Income
696,834850,611 620,995 1,247,859 2,337,4993,081,8333,321,975 Net
financing costs 1,605 38,36938,918198,881 955,810 (183,721) 323,657
Share of losses of associates16,799 12,55215,0257,27327,853 23,862
25,000 Income before income taxes678,430799,690 567,0521,041,705
1,353,8363,241,6922,973,318 Income taxes expense
45,103115,78854,664 84,807 221,238566,535535,197 Minority Interest
9,2743,079 200 -(1,010)3,0743,000 Net Income $624,053
$680,823$512,188$ 956,898 $ 1,133,608 $2,672,083 $2,435,121
PERCENTAGE OF REVENUE Revenue 100.0% 100.0%100.0%100.0%100.0%
100.0% 100.0% Cost of Revenues 50.1%59.5% 63.8% 61.8%
60.3%60.4%60.0% Gross Profit 49.9%40.5% 36.2% 38.2% 39.7%39.6%40.0%
R&D12.7% 9.8% 10.0% 10.0%8.4% 8.9%10.0% SG&A 19.4%16.9%
17.7% 18.3% 17.9%16.2%17.9% Operating Income 18.2%14.2%7.3%9.7%
12.9%14.1%11.9% Net Income 16.3%11.4%6.0%7.5%6.3%12.2% 8.7%
YEAR-TO-YEAR CHANGE Revenue N/A 56.3% 42.2% 51.0% 40.7%19.0% 28.3%
Cost of RevenuesN/A 85.5% 52.4% 46.3% 37.2%19.4% 27.4% Gross
ProfitN/A 26.9% 27.2% 59.2% 46.4%18.5% 29.7% R&D N/A 20.7%
44.6% 51.0% 17.7%27.4% 43.4% SG&AN/A 36.7% 48.2% 56.4% 37.7%
7.8% 41.3% Operating IncomeN/A 22.1%-27.0%100.9% 87.3%30.0% 7.8%
Net IncomeN/A9.1%-24.8% 86.8% 18.5% 132.4%-8.9% SOURCE: TBR
ESTIMATES AND HUAWEI NOTE: Huawei reports annual results only24
Huawei 4Q10 | Network Business Quarterly2011 Technology Business
Research, Inc. 25. Appendix Balance SheetTBR HUAWEI NETWORKS
Consolidated Balance Sheet TBR (i n $ Thous a nds ) CALENDAR YEAR
200520062007 2008 2009 FISCAL YEAR 200520062007 2008 2009 ASSETS
Cash and cash equivalents $ 883,029 $ 1,056,042 $1,892,266
$3,033,106 $4,279,315 Trade and other receivables 2,322,711
3,650,0865,488,0777,627,7209,263,944 Investments- 64 ---
Inventories 1,214,842 1,420,4552,267,2763,325,6363,652,028 Deferred
tax assets 109,514 181,529 - 540,033753,477 Total Current
Assets4,530,096 6,308,1769,647,619 14,526,497 17,948,763 Plant and
Equipment, Net894,142 939,784931,7211,051,3481,217,538 Intangible
Assets13,86210,937 15,038 18,328 80,954 Other Assets315,552
237,286502,5561,467,8461,196,750 Total Assets$ 5,753,652 $
7,496,183 $ 11,096,934 $ 17,064,019 $ 20,444,005 LIABILITIES AND
EQUITY Interest-bearing loans and borrowings $ 288,170 $ 332,883
$158,628 $1,873,665 $1,154,589 Income tax payable150,197 163,312
94,513195,549541,063 Trade and other payables2,582,120
4,183,0466,029,5058,735,208 10,249,305 Provision for warranties
39,88780,122151,201183,860172,010 Total Current Liabilities
3,060,374 4,759,3636,433,847 10,988,281 12,116,967 Interest-bearing
loans and borrowings 253,17339,790215,280148,0691,242,863 Other
payables 23,41225,894336,417522,427743,083 Total Liabilities
3,336,959 4,825,0476,985,544 11,658,777 14,102,913 Minority
Interest in Subsidiary Companies 4,912 4,286127,5394,7629,223 Total
Capital and Reserves2,411,781 2,666,8503,983,8515,400,4796,331,869
Total Liabilities and Equity$ 5,753,652 $ 7,496,183 $ 11,096,934 $
17,064,019 $ 20,444,005 FINANCIAL RATIOS Days Sales Outstanding
154.96156.67 156.01 154.07 154.96 Turns on Inventory 2.934.12
6.966.466.25 Days Inventory Outstanding 124.58 88.6752.4156.4858.36
Fixed Asset Turnover 6.699.2713.7218.2319.23 Days Cash Outstanding
53.15 44.7153.0560.4270.60 Total Asset Turnover 4.161.28
1.381.281.16 Debt/Asset Ratio 0.580.64 0.630.680.69 Current
Ratio1.481.33 1.501.321.48 Return on Assets11.8%7.7%10.3% 8.1%14.2%
Return on Equity28.2% 20.2%28.8%24.2%45.6% Average Annual Revenue
per Employee$ 170,901 $ 139,408 $158,520 $206,520 $229,694 Employee
Count35,00061,000 81,000 87,502 95,000 CNY/USD Exchange
Rate6.92926.831 SOURCE: TBR AND HUAWEI NOTE: Huawei only reports
Balance Sheet annually25 Huawei 4Q10 | Network Business
Quarterly2011 Technology Business Research, Inc. 26. Appendix
Revenue Model TBRTBRHUAWEI REVENUE MODEL CALENDAR YEAR200520062007
2008 2009 2010 Est. FISCAL YEAR200520062007 2008 2009 2010 Est. IN
$ THOUSANDS Reported Revenue$ 5,981,542 $8,503,897 $ 12,840,113 $
18,070,917 $ 21,820,963 $28,000,000 Wireless$ 2,036,287 $2,636,208
$3,980,435 $5,601,984 $6,328,079 $ 8,500,000 Fixed $ 1,092,800
$1,165,034 $1,399,572 $1,445,673 $1,527,467 $ 1,950,000 Optical $
984,242 $1,360,624 $2,189,790 $3,175,937 $5,093,848 $ 5,750,000
Data$ 605,126 $ 807,870$1,200,000 $1,264,964 $1,527,467 $ 2,400,000
Service & Software$ 687,511 $ 901,413$1,964,537 $2,791,957
$3,644,101 $ 4,900,000 Handset $ 510,348 $1,003,460 $2,105,779
$3,790,401 $3,700,000 $ 4,500,000 PERCENTAGE OF REVENUE Reported
Revenue100.0%100.0% 100.0% 100.0% 100.0%100.0% Wireless
34.0%31.0%31.0%31.0%29.0% 30.4% Fixed18.3%13.7%10.9% 8.0% 7.0%7.0%
Optical16.5%16.0%17.1%17.6%23.3% 20.5% Data 10.1% 9.5% 9.3% 7.0%
7.0%8.6% Service & Software 11.5%10.6%15.3%15.5%16.7% 17.5%
Handset8.5% 11.8%16.4%21.0%17.0% 16.1% YEAR-TO-YEAR CHANGE Reported
Revenue 56.3%42.2%51.0%40.7%20.8% 28.3% WirelessN/A
29.5%51.0%40.7%13.0% 34.3% Fixed N/A6.6%20.1% 3.3% 5.7% 27.7%
Optical N/A 38.2%60.9%45.0%60.4% 12.9% DataN/A 33.5%48.5% 5.4%20.8%
57.1% Service & SoftwareN/A 31.1%117.9% 42.1%30.5% 34.5%Handset
N/A96.6%109.9% 80.0%-2.4% 21.6% SOURCE: TBR ESTIMATES AND HUAWEI
NOTE: Huawei reports annual results only26 Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 27.
Appendix Geographic Model TBRTBRHUAWEI REVENUE BY GEOGRAPHIC
REGIONCALENDAR YEAR2006 2007 2008 2009 2010 Est. CALENDAR
YEAR200620072008 2009 2010 Est.FISCAL YEAR2006 2007 2008 2009 2010
Est. FISCAL YEAR200620072008 2009 2010 Est.IN $ THOUSANDS
PERCENTAGE OF REVENUEChinaChina34.7%28.0%25.0%46.5%
35.0%Sales$2,950,852 $3,595,232 $4,517,729 $ 10,146,748 $ 9,800,000
International65.3%72.0%75.0%53.5% 65.0%Orders $3,850,000 $4,853,563
$6,356,168 $ 10,042,746 $11,500,000 Asia Pacific (excl. China)
32.2% 29.6% 31.8%17.6% 21.5%InternationalIndia2.2%4.7% 7.2%
7.1%6.1%Sales$5,553,045 $9,244,881 $ 13,553,188 $ 11,674,215
$18,200,000 CALA 5.3%7.0% 8.5% 4.2%6.5%Asia Pacific (excl. China)
$2,740,511 $3,799,383 $5,743,188 $3,842,815 $ 6,014,000 EMEA 26.7%
34.3% 33.4%29.8% 35.4%India$ 186,000$ 600,000$1,300,000 $1,560,000
$ 1,708,000 Europe 9.1%16.3% 16.5%13.7% 17.5%CALA $ 450,000$
900,000$1,539,000 $ 923,400$ 1,820,000 MEA17.6% 17.9% 16.9%16.0%
17.9%EMEA $2,270,000 $4,399,296 $6,040,000 $6,500,000 $ 9,912,000
North America1.1%1.1% 1.3% 1.9%1.6%Europe $ 770,000$2,099,296
$2,981,000 $3,000,000 $ 4,900,000 YEAR-TO-YEAR GROWTH
(REVENUE)MEA$1,500,000 $2,300,000 $3,059,000 $3,500,000 $ 5,012,000
China -17.8% 21.8% 25.7%124.6%-3.4%North America$92,533$ 146,203$
231,000$ 408,000$ 454,000 International 132.1% 66.5%
46.6%-13.9%55.9%International Orders $7,150,000 $ 11,146,437 $
16,943,832 $ 20,115,650 $24,500,000 Asia Pacific (excl. China)NA
38.6% 51.2%-33.1%56.5%Asia Pacific (excl. China) $2,000,000
$2,500,000 $4,650,000 $6,649,500 $ 7,500,000 India86.0%222.6%
116.7% 20.0%9.5%India$ 350,000$ 700,000$2,000,000 $2,400,000 $
4,500,000 CALANA100.0% 71.0%-40.0%97.1%CALA $ 566,500$
750,000$1,250,000 $1,562,500 $ 2,000,000 EMEANA 93.8% 37.3% 7.6%
52.5%EMEA $4,479,000 $7,354,316 $ 10,064,091 $ 10,404,646
$13,000,000 EuropeNA172.6% 42.0% 0.6% 63.3%North America$ 104,500$
542,121$ 979,741$1,499,004 $ 2,000,000 MEA NA 53.3% 33.0%14.4%
43.2%Total Revenue$8,503,897 $ 12,840,113 $ 18,070,917 $ 21,820,963
$28,000,000 North America2993.7% 58.0% 58.0%76.6% 11.3%Total Orders
$ 11,000,000 $ 16,000,000 $ 23,300,000 $ 30,158,396 $36,000,000
Total Revenue42.2% 51.0% 40.7%20.8% 28.3% PERCENTAGE OF ORDERS
China35.0% 30.3% 27.3%33.3% 31.9% International65.0% 69.7%
72.7%66.7% 68.1% YEAR-TO-YEAR GROWTH (ORDERS) China10.3% 26.1%
31.0%58.0% 14.5% International51.7% 55.9% 52.0%18.7% 21.8% Total
Orders 34.1% 45.5% 45.6%29.4% 19.4% SOURCE: TBR ESTIMATES AND
HUAWEI NOTE: Huawei only reports annual financial results 27Huawei
4Q10 | Network Business Quarterly2011 Technology Business Research,
Inc. 28. Appendix OPEX ModelTBRTBR HUAWEI OPERATING EXPENSE MODEL
CALENDAR YEAR 20052006 2007 200820092010 Est. FISCAL YEAR 20052006
2007 200820092010 Est. IN $ THOUSANDS Total Revenue $ 5,981,542 $
8,503,897 $ 12,560,356 $ 18,328,956$ 21,500,000 $ 28,000,000
SG&A Expense$ 1,013,656 $ 1,502,472 $2,349,741
$3,235,871$3,538,135 $ 5,000,000 Sales & Marketing Expense $
608,194 $ 901,483 $1,409,844 $1,941,523$2,122,881 $ 3,000,000
General and Administrative Expense$ 405,462 $ 600,989 $
939,896$1,294,349$1,415,254 $ 2,000,000 R&D Expense $ 588,000 $
850,390 $1,284,011 $1,510,853$1,952,862 $ 2,800,000 SALES AND
MARKETING EXPENSE BREAKOUT Sales Expense $ 364,916 $ 540,890 $
845,907$1,164,914$1,273,729 $ 1,800,000 Partner and Channel
Spending$91,229 $ 135,223 $ 211,477$ 291,228 $ 318,432$450,000
Marketing Spending$ 152,048 $ 225,371 $ 352,461$ 485,381 $
530,720$750,000 Advertising $91,229 $ 135,223 $ 211,477$ 291,228 $
318,432$450,000 Total Sales and Marketing Expense $ 608,194 $
901,483 $1,409,844 $1,941,523$2,122,881 $ 3,000,000 Total SG&A
Expense16.9% 17.7% 18.7%17.7% 16.5% 17.9% Sales and Marketing
Expense 10.2% 10.6% 11.2%10.6%9.9% 10.7%Sales Expense6.1%6.4% 6.7%
6.4%5.9%6.4%Partner and Channel Spending 1.5%1.6% 1.7%
1.6%1.5%1.6%Marketing Spending 2.5%2.7% 2.8% 2.6%2.5%2.7%
Advertising 1.5%1.6% 1.7% 1.6%1.5%1.6%General and Administrative
6.8%7.1% 7.5% 7.1%6.6%7.1% CORPORATEWIDE HEADCOUNT R&D
16,80029,28034,830 37,62640,85050,600 Marketing, Sales and Customer
Service 13,30023,18032,400 35,00138,00044,000 Supply
Chain2,8004,880 8,1008,750 9,50011,000 Admin.2,1003,660 5,6706,125
6,650 4,400 Total Employees35,000 61,00081,000 87,50295,000 110,000
SOURCE: TBR ESTIMATES AND HUAWEI NOTE: Huawei only reports annual
financial results28 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 29. Appendix Forecast
ModelTBRTBR HUAWEI FINANCIALS AND TBR QUARTERLY PROJECTIONCALENDAR
YEAR 2005 20062007 2008 20092010 Est.FISCAL YEAR 2005 20062007 2008
20092010 Est.IN $ THOUSANDSNet Sales $5,981,542 $ 8,503,897 $
12,840,113 $ 18,070,917 $21,820,963 $28,000,000Gross
Profit$2,422,176 $ 3,079,886 $4,903,381 $7,180,916 $ 8,632,557
$11,200,000SG&A$1,013,656 $ 1,502,472 $2,349,741 $3,235,871 $
3,538,135 $ 5,000,000R&D$ 588,000 $ 850,390 $1,284,011
$1,510,853 $ 1,952,862 $ 2,800,000Operating Income $ 850,611 $
620,995 $1,247,859 $2,337,499 $ 3,081,833 $ 3,321,975Net Income $
680,823 $ 512,188 $ 956,898$1,133,608 $ 2,672,083 $
2,435,121PERCENTAGE OF REVENUEGross Margin40.5% 36.2%38.2%39.7%
39.6% 40.0%SG&A16.9% 17.7%18.3%17.9% 16.2% 17.9%R&D
9.8%10.0%10.0%8.4% 8.9% 10.0%Operating Margin14.2%7.3% 9.7%12.9%
14.1% 11.9%Net Margin11.4%6.0% 7.5%6.3%12.2%8.7%YEAR-TO-YEAR
GROWTHNet SalesN/A42.2%51.0%40.7% 20.8% 28.3%Gross Profit
N/A27.2%59.2%46.4% 20.2% 29.7%SG&A N/A48.2%56.4%37.7%9.3%
41.3%R&DN/A44.6%51.0%17.7% 29.3% 43.4%Operating Income
N/A-27.0% 100.9% 87.3% 31.8%7.8%Net Income N/A -24.8%86.8%18.5%
135.7%-8.9%SOURCE: TBR ESTIMATES AND HUAWEINOTE: Huawei only
reports annual financial results29 Huawei 4Q10 | Network Business
Quarterly2011 Technology Business Research, Inc. 30. Appendix
Financial GraphsTBRFinancial GraphsTBRREVENUE GROWTH YEAR-TO-YEAR
TBR GROSS MARGIN & OPERATING MARGIN 60.0%50% 51.0% 40.0%
50.0%36.2%38.2% 39.7% 39.6%40% 42.2%40.7% 40.0%28.3% 30% 30.0%19.0%
20.0%20% 12.9% 14.1% 11.9% 10.0%7.3% 9.7%10%0.0% 20062007
200820092010 Est.0% 20062007200820092010 Est.SOURCE: TBR AND
HUAWEIGROSS MARGIN OPERATING MARGIN SOURCE: TBR ESTIMATES AND
HUAWEITBRTBRHUAWEI PERCENTAGE OF REVENUE BY REGIONTBRHUAWEI REVENUE
COMPOSITION50% 40%40%30%30%20%20%10%10% 0%0% 20062007 2008 20092010
Est. 200620072008 2009 2010 Est.China APAC (excluding China)
Wireless FixedCALAEMEA OpticalDataNorth AmericaServices &
SoftwareHandsetSOURCE: TBR ESTIMATES AND HUAWEISOURCE: TBR
ESTIMATES AND HUAWEI30 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 31. Appendix Financial
GraphsTBRFinancial Graphs TBRSELLING, GENERAL, & ADMINISTRATIVE
EXPENSE TBR RESEARCH & DEVELOPMENT EXPENSE
$6,00020.0%$3,00010.0% $5,00019.0%$2,5009.5% In MillionsIn Millions
$4,00018.0%$2,000 $3,00017.0%9.0%$1,500 $2,00016.0%$1,0008.5%
$1,00015.0%$0 14.0% $500 8.0% 2006 2007 200820092010 Est. 2006 2007
2008 20092010 Est.SG&ASG&A as % of Total Revenue
R&DR&D as % of Total Revenue SOURCE: TBR AND HUAWEISOURCE:
TBR AND HUAWEIRETURN ON ASSETS TBRRETURN ON EQUITY TBR 16%
14.2%45.6% 11.8% 45% 12%10.3% 7.7% 8.1% 35%8% 28.2%28.8%24.2%4%
25%20.2%0% 15% 20052006 20072008 20092005 2006 2007 20082009
SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEI31 Huawei 4Q10 |
Network Business Quarterly 2011 Technology Business Research, Inc.
32. Appendix Financial Graphs TBRFinancial Graphs TBRDAYS CASH
OUTSTANDING75.00 70.6060.4260.0053.1553.05 Number of
Days44.7145.0030.0015.00 0.0020052006 2007 20082009 SOURCE: TBR AND
HUAWEI TBR TBR DEBT/ASSET RATIOCURRENT RATIO TBR TBR0.750.68 0.69
2.000.580.64 0.630.60 1.48 1.50 1.481.501.33
1.320.451.000.300.500.150.000.002005200620072008200920052006
200720082009 SOURCE: TBR AND HUAWEI SOURCE: TBR AND HUAWEI32 Huawei
4Q10 | Network Business Quarterly2011 Technology Business Research,
Inc. 33. Appendix Go-to-Market and Resource Management GraphsTBR
Go-to-Market and Resource Management GraphsTBRTBR INVENTORY
TURNSTBR TBRTOTAL ASSET TURNOVER8.006.964.504.16 6.466.256.00Number
of Turns Number of Turns3.004.124.002.931.28 1.381.28
1.161.502.000.000.00200520062007 20082009 200520062007 2008
2009SOURCE: TBR AND HUAWEISOURCE: TBR AND HUAWEITBRFIXED ASSET
TURNSTBR DAYS SALES OUTSTANDING24.00180.00 154.96 156.67156.01
154.07 154.96 18.2319.23150.0018.00Number of DaysNumber of Turns
120.00 13.7212.00 90.00 9.27 6.69 60.00 6.0030.00 0.000.00
2005200620072008 2009 2005200620072008 2009SOURCE: TBR AND
HUAWEISOURCE: TBR AND HUAWEI 33Huawei 4Q10 | Network Business
Quarterly 2011 Technology Business Research, Inc. 34. Appendix
Acquisitions TBRHuawei AcquisitionsCompanyDescription Huawei
purchased Options RF (radio frequency) semiconductor unit M4S for 8
million (or $11 million). Both companies had been working together
to develop mobileM4Sbroadband solutions such as USB modems,
embedded modules, chipsets, software andOctober 2010 services for
the European market, and Huaweis decision to make the purchase
highlights its aspirations to become an integral supplier to
developed markets. Huawei and Option may establish an R&D
center in Belgium.34 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 35. Appendix AlliancesTBR Huawei
AlliancesCompanyScope of PartnershipIntertrust Huawei entered into
a licensing agreement to use Intertrusts Sushi Marlin Client SDK
andTechnologies Bluewhale Marlin Broadband Server. Both companies
will also explore business opportunitiesMarch 2011 globally.
Huawei-Symantec and Force10 Networks in long-term partnership to
combine security, storageForce10 Networks and networking expertise
to better address vertical markets in North America,
particularlyFebruary 2011 healthcare, finance and telecom.SPIRIT
DSP Huawei extended licensing agreement to use SPIRITs voice and
video engines in its IMS, UC andFebruary 2011fixed mobile
convergence platforms.Carrier IQ Companies entered into global
software licensing agreement with Huawei integrating
CarrierFebruary 2011IQs solutions into its mobile broadband data
terminals. Companies are working together to develop
next-generation optical transport and accessSmartworld solutions to
build smart cities. Huawei will provide an end-to-end optical
transport solutionJanuary 2011 and Smartworld will deploy and
manage the solution for Dubai World Central (DWC) and Al- Maktoum
International Airport, both in the United Arab Emirates.Qatar
Telecom Jointly develop telecom solutions for key industries in
Qatar and other Middle Eastern countries.January 2011 Entered
Master Purchase Agreement to give Huawei access to TCS
location-based services (LBS)TeleCommunication technology. TCS will
let Huawei use its end-to-end Xypoint LBS solutions in its own
products andSystems (TCS) services. Both companies will provide
operators with professional and managed services forJanuary 2011
their LBS solutions.SequansCommunications Accelerating development
and commercialization of TD-LTE technology for global
market.October 201035 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 36. Appendix Alliances TBR
Huawei Alliances (continued)CompanyScope of Partnership Huawei
partnered with Amerilink Telecom, a startup run by former Sprint
employees, to help theAmerilink Telecomvendor penetrate further
into the North American market. Amerilink has also become a key
U.S.August 2010distributor of Huawei equipment. Huawei hopes its
partnership will better position the firm to win deals with Tier 1
operators, particularly Sprint. Huawei and IPWireless will jointly
conduct interoperability testing and service provider trials for
each companys Integrated Mobile Broadcast (IMB) technology. IMB
technology offloads dataIPWireless traffic from 3G networks,
allowing live video streaming and broadcasting and storage of
content onJuly 2010 mobile devices. Huawei and IPWireless are
conducting these tests to ensure mobile devices are compatible with
IMB networks. Huawei and PerSay, a biometric speaker verification
product supplier, have entered a partnershipPerSay that will see
PerSays VocalPassword and FreeSpeech voice biometrics offerings
integrated withApril 2010 Huaweis IP contact center product suite.
Huawei and Opera entered a partnership whereby Huawei will
preinstall the Opera Mobile 10Opera Software browser on various
models of its mobile phones. Operas cross-platform user interface
softwareFebruary 2010 allows operators and device manufacturers to
install a mobile browser across a variety of devices.German Telecom
Huawei, German Telecom and T-Mobile signed a Memorandum of
Understanding to identify,T-Mobile develop and test M2M solutions.
The partners will acquire pilot customers to test M2M
productsJanuary 2010 and services, as well as build out
distribution and business models around M2M. Huawei and Tianjin
Jinke will develop and bring to market e-publishing solutions for
telecomTianjin Jinke carriers. Tianjin Jinke will build terminals
for its e-readers, while Huawei will provide back-officeElectronics
System software to manage copyrights, billing, publishing and
customs. The first e-reader will be launchedJanuary 2010 with China
Mobile in early 2010.36Huawei 4Q10 | Network Business Quarterly
2011 Technology Business Research, Inc. 37. Appendix Recent Product
AnnouncementsTBRHuawei Recent Product AnnouncementsProduct Series
Configuration Configured with third-generation router architecture
to support mobile and fixed WAN access asAR G3 Enterprise well as
multi-service processing. Uses multi-core CPUs and non-blocking
switching architecture.Access RouterHas 3M PPS processing
performance and 80 Gbps switching capacity. The AR G3 supportsMarch
2011 CDMA2000/WCDMA/TD-SCDMA wireless standards as well as fixed
standards including ETH, e!, XDSL, XPON (scalable to 10G PON).
Integrates hybrid and pure packet microwave transmissions. Upgraded
version (OptiX 900)OptiX RTN 980provides throughput of 1 Gbps per
frequency carrier, while basic versions range from 400 Mbps
toFebruary 20111 Gbps. Supports aggregation of microwave
transmissions in 14 RF directions and is upgradable to 28 RF
directions. Also supports TDM and packet cross-connections.Any
ConnectionMobile Broadband Seamlessly evolves from UMTS and HSPA to
LTE. Features on-demand routing modes betweenBackhaul (MBB) dynamic
and static with 300 mm-depth edge routers installed in outdoor
cabinets.February 2011 Professional service solution that is
applicable to IP, optical transmission, microwave and FTTxiCare
networks. iCare provides network planning, network evaluation and
optimization for live networksFebruary 2011 as well as aids in
service migration and network evolution.E398 Worlds first
triple-mode modem. Supports 2G (GSM), 3G (UMTS) and LTE. The modem
is initiallyDecember 2010available in select European markets.WiMAX
TD-LTE Contains dual mode remote radio unit (RRU) and dual mode
base band unit (BBU) to support bothSingleRANWiMAX and TD-LTE in
the 2.3GHz, 2.5GHz and 3.5GHz frequency bands. Also supports MIMO
andNovember 2010Beamforming technologies.Intelligent
OpticalDistribution Network Lets operators locate and operate
optical fibers in an FTTH environment. Supplements Huaweis(iODN)
portfolio of FTTH solutions ranging from equipment to delivery and
services.October 201037Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 38. Appendix Recent Product
AnnouncementsTBRHuawei Recent Product Announcements
(continued)Product SeriesConfigurationProvides operators with a
unified service platform that aggregates Internet applications
anddelivers cloud-based services to end-users. Platform supports
all major smartphone operatingDigital Shopping Mallsystems,
including Android, RIM and Symbian. At launch, the Mall featured
80,000 apps ranging(DSM)from music to e-books to video. The store
can be accessed via nearly any Internet-enabledOctober
2010electronic device including tablets and televisions. App
revenue is split 70:30, with 70% going todevelopers and 30% to
telecom operators.Oceanspace S2600Oceanspace N8300Storage solution
tailored to SMB. Offers unified storage platform and multi-service
gateway forSecospace USG2000security and routing.BSR/HSROctober
2010Uses four twisted frequency pairs to achieve downstream speeds
of 700 Mbps at a distance of 400SuperMIMO meters. Addresses
crosstalk between multiple twisted pairs and increases DSL
bandwidth by 75%September 2010from an average of 100 Mbps per
twisted pair to 175 Mbps. Deployable to FTTB/FTTC access andprivate
line applications, including base station access. End-to-end
solution that includes optical distribution frames, fiber
distribution terminals, fiberEasy ODNaccess terminals, optical
filters, optical splitters, closures and access terminal boxesJune
2010 Solution lets operators deploy optical distribution networks
with easy operation, maintenanceand administration Metropolitan OTN
system accommodates data, video and storage while reducing operator
costsOSN8800 T16 through energy efficiency, low maintenance and
space-saving featuresJune 2010 Achieves 40G/100G transport and
offers full-service cross-connection capabilities that supportODUk
wavelength and packet-cross connections38 Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 39.
Appendix Recent Product Announcements TBR Huawei Recent Product
Announcements (continued)Product Series ConfigurationiManager
U2000- Pre-integration solution for network fault management
developed with HPTeMIp SNMP-based iManager U2000 provides
end-to-end visualized management, accurate error locating
andsolution enhanced O&M efficiencyMarch 2010 This solution
decreases the Operation Support System integration period for
operators Triple-mode LTE modem compatible with LTE, UMTS and
GSME398 Modem Based on Qualcomms MDM9200TM chipsetFebruary 2010
Allows users to switch between standardsiManager U2520 IP network
assessment and optimization system that integrates IP control and
IP forwarding planesFebruary 2010 Includes visualized IP service
quality and visualized IP route functionsSingleRAN@Broad Mobile
broadband solution that handles increased mobile data
trafficSolutionFebruary 2010 Decreases per-bit cost in sites,
transport and operation & maintenance 300 mm-depth IP platform
with 20G/40Gbps capacityCX600-X1/X2 Metro Enables IP intelligence
on metro network edge and drive convergence and improves capability
andServices Platform flexibilityFebruary 2010 Enhances the IPTime
broadband metro solution 1588v2-compliant DSL prototype addresses
issues with GPS clock synchronizationIPTime Mobile Time
synchronization accuracy to nanosecond levelBackhaul
SolutionJanuary 2010 DSL with microcell and LTE base stations
leverage existing copper wire from legacy networks Backhaul option
for operators building out 3G and or 4G networks39 Huawei 4Q10 |
Network Business Quarterly2011 Technology Business Research, Inc.
40. Appendix Customer DealsTBRHuawei Recent Customer
DealsCompanyScope of DealMTC Building end-to-end 3G network for
MTC, including the provision of RAN and packet switching.
AlsoLebanon providing range of professional services.March
2011Vodafone Hutchison Huawei replacing 5,800 base stations across
Eastern Australia for VHA with its SingleRAN and radio(VHA)network
controllers (RNC). The new network equipment lets VHA deliver 2G,
3G and 4G service fromAustraliaa single base station at up to 42
Mbps downlink speed. VHA plans to replace an additional 2,200
baseFebruary 2011stations over the next 18 monthsEtisalatUnited
Arab Deploying commercial LTE network across United Arab Emirates
for Etisalat.EmiratesFebruary 2011Cell C Deployed NGBSS solution
for Cell C, letting the operator generate real-time usage data of
its postpaid,South Africa prepaid and hybrid services and provide
its subscribers with converged billing.February 2011NII Holdings
Huawei providing end-to-end UMTS network, including RAN, backhaul
and core, as well as TISBrazil, Mexico services for NII Holdings
Push-to-Talk service in Brazil and Mexico.February 2011Northeast
WirelessNetworks Deploying Huaweis SingleRAN solutions to bring
wireless coverage to rural areas in Maine andUnited
StatesOregon.February 20112degrees Investing NZ $100 million (or
U.S. $77 million) over the next two years to build out 2G and 3GNew
Zealand network in New Zealand that is LTE-ready. Huawei providing
all equipment.February 201140 Huawei 4Q10 | Network Business
Quarterly 2011 Technology Business Research, Inc. 41. Appendix
Customer DealsTBR Huawei Recent Customer Deals (continued) Company
Scope of Deal Telkom Telkom secured a $127 million seven-year loan
from a syndicate of international banks to build out its South
Africa 8ta mobile network in South Africa. Huawei is providing most
of the network infrastructure. February 2011 WIND Deployed core
network from Huawei to bring Wide Band AMR (also known as HD voice)
services to its Canada customers across Canada. January 2011 Public
Telecom (PTC) PTC, owner of Bravo, is replacing its legacy billing
system with Huaweis BSS solution to improve Saudi Arabiaoperational
infrastructure efficiency. January 2011 Libya Silphium
Mediterranean Huawei Marine constructing and laying 440 km
submarine cable connecting Libya and Greece on Sea behalf of the
Libyan International Telecom Company (LITC). January 2011 Vodafone
Awarded Huawei five-year managed services contract to assume
operations and maintenance of Ghana Vodafones mobile, microwave,
SDH and fixed switching networking in Ghana. January 2011
TeliaSonera Using Huaweis SingleRAN@Broad solution to upgrade and
expand operators GSM/HSPA+/LTE Norwaynetwork across southern
Norway. The solution will make TeliaSoneras HSPA+ network handle 42
January 2011Mbps with the option of a future upgrade to 84 Mbps.
Kyivstar Ukraine Kyivstar building out FTTB network across Ukraine
using Huaweis Ethernet switches. January 201141Huawei 4Q10 |
Network Business Quarterly2011 Technology Business Research, Inc.
42. Appendix Customer Deals TBRHuawei Recent Customer Deals
(continued) Company Scope of Deal T-Mobile Rolling out LTE network
and upgrading T-Mobiles GSM network in Austria under a five-year
Austria contract. T-Mobile plans to cover one quarter of Austrias
population with LTE by the end of 2013. December 2010 Government
Guyana government paying Huawei $35 million to deploy a wireless
network at select hospitals, Guyana police stations, military
outposts and other government facilities across the country.
December 2010 Millicom International Huawei deploying international
long-distance (ILD) network covering Guatemala, Honduras and El
Cellular (MIC) Salvador for Millicom. Central America December 2010
TTST Huawei was exclusive supplier of an end-to-end WiMAX network
covering the Caribbean islands of Trinidad & Tobago Trinidad
& Tobago for TSTT. December 2010 China Unicom Guangzhou Unicom,
a subsidiary of China Unicom, is using Huaweis Hybrid MSTP
Transport China solution to provide EDGE, HSPA+ and WLAN service
during the 2010 Asian Games in Guangzhou. December 2010 SI Wireless
Building out CDMA EV-DO network covering 1.2 million POPs in
Illinois, Kentucky and Tennessee United States for SI Wireless. The
network includes 300 cell sites and will be finished by mid-2012.
November 2010 Bite Huawei upgraded all of Bites base stations to be
LTE-ready as well as deployed 80 additional sites. Latvia Huawei
also optimized Bites RAN to be 20% to 30% more energy-efficient.
November 201042 Huawei 4Q10 | Network Business Quarterly2011
Technology Business Research, Inc. 43. Appendix Customer
DealsTBRHuawei Recent Customer Deals (continued) Company Scope of
Deal CamGSM CamGSM purchasing $500 million worth of network
equipment and services from Huawei over five Cambodia years. CamGSM
obtained financing via the Bank of China. November 2010 China
MobileChina Mobile chose Huawei to supply and build out an 80x40G
Wavelength Division Multiplexing China national backbone network.
Huaweis 40G OTN solution will upgrade the wavelength capacity of
November 2010 China Mobiles network from 10G to 40G. Datame Oy
Huawei building end-to-end WiMAX network for Datame Oy that will
cover 70% of Finlands Finland population by the end of 2013.
November 2010 Aero2 Awarded frame contract to deploy worlds first
TD-LTE network for Aero2 in Poland. Huawei is Poland providing an
end-to-end LTE TDD/EPC solution. November 2010 Movistar Movistar
replacing its CDMA equipment with Huaweis Advanced Telecom
Computing Peru Architecture-based (ATCA) CDMA mobile softswitch
all-IP solution. November 2010 Huawei supplying and rolling out
end-to-end SingleRAN network across Bangladesh for Grameenphone
Grameenphone under a three-year contract. Products supplied include
SingleCORE, SingleEPC, Bangladesh ngHLR and IP Signalling Transfer
Point (STP) solutions. The new infrastructure will bulk up capacity
November 2010 of Grameenphones existing network so it can handle an
influx of voice and data traffic. Huawei will deploy a wireless
network covering 350 villages across Nigeria for MTN for $40
million MTN by the end of May 2011. MTN is planning further network
expansion in late 2011 to cover an Nigeria additional 500 villages
and Huawei stands a good chance of winning that contract should it
do a October 2010 good job on phase one.43 Huawei 4Q10 | Network
Business Quarterly 2011 Technology Business Research, Inc. 44.
Appendix Customer Deals TBRHuawei Recent Customer Deals (continued)
Company Scope of Deal Telekom Brunei BerhadHuawei delivering
end-to-end FTTH broadband network covering 40,000 subscribers in
Brunei Bruneiwith 150 Mbps Internet service. The project has been
divided into four phases. October 2010 MegaFon Using Huawei NE5000E
routers to construct backbone nodes for a 40 GB IP/MPLS network in
RussiaMoscow and St. Petersburg. The routers will help MegaFon
optimize its existing core network by October 2010bulking up
bandwidth. Vodafone Paying Huawei 1 billion (or $1.4 billion) to
supply and deploy its HSPA+ SingleRAN solution to Italy 12% of
Italys population (about 1800 towns). October 2010 Lattelecom
LatviaHuawei supplying fiber optic access nodes and devices for
end-users to Lattelecom. October 2010 du United Arab Upgraded dus
HSPA+ 21 Mbps network to DC-HSPA+ 42 Mbps. Emirates September 2010
Huawei will plan, design, deploy and maintain a 3G HSPA network in
three telecom circles in India Bharti Airtel for Bharti Airtel.
Ericsson and Nokia Siemens also won similar contracts, with
Ericsson garnering India seven circles and Nokia Siemens landing
three circles. Bharti Airtel has 3G licenses for 13 telecom
September 2010 circles across India. MTS MTS India outsourced the
management of all 22 of its telecom circles in India to Huawei, ZTE
and India Ericsson. September 201044 Huawei 4Q10 | Network Business
Quarterly2011 Technology Business Research, Inc. 45. Appendix
Customer Deals TBRHuawei Recent Customer Deals (continued)Company
Scope of DealSafaricomDeployed Convergent Billing Solution (CBS) in
Kenya for Safaricom. Huaweis CBS provides onlineKenyarating,
real-time control, and express billing for telecom
operators.September 2010Huawei launched an 1800MHz LTE/EPC network
using its SingleRAN@Broad solution for Mobyland inMobylandPoland,
allowing for peak downlink speeds of 146 Mbps per user. Huawei
first used a softwarePolandupgrade to make Mobylands 2G network
support LTE. This is the first commercial LTE/EPC networkSeptember
2010based on 1800MHz spectrum with 20MHz bandwidth on a single
radio unit.Tata TeleservicesHuawei to provide SingleRAN for 3G
network in five of Tatas nine telecom circles in India.
NokiaIndiaSiemens won the remaining four circles.September
2010QtelHuawei will roll out FTTH for Qtel in Qatar. Huawei will
replace copper connections with high-speedQatarfiber, enabling
downlink speeds up to 100Mbps. The project will last for three
years.August 2010Huawei is providing BT with optical access and
transmission products, including Huaweis SingleFANBTsolution, to
help with the deployment of BTs new national fiber network. BT
boosted its investmentUnited Kingdomin broadband by 1 billion ($1.5
billion) to bring faster Internet services to two-thirds of
U.K.August 2010 households by 2015. Huawei has been an integral
supplier of fiber access equipment to BT since theoperators
broadband deployment began in 2008.Huawei will build and manage an
end-to-end turn-key FTTx High-Speed Internet network using
GPONMaxis Berhadtechnology for Maxis Berhad. The duration of the
managed services agreement is three years. MaxisMalaysiaBerhad
plans to cover 12 million customers across Malaysia, and will
particularly target enterpriseAugust 2010customers.VodafoneVodafone
is offering customers in the United Kingdom a monthly Mi-Fi package
using the HuaweiUnited KingdomR201 router.August 201045Huawei 4Q10
| Network Business Quarterly 2011 Technology Business Research,
Inc. 46. Appendix Customer Deals TBR Huawei Recent Customer Deals
(continued) Company Scope of Deal TelefonicaTelefonica has been
using Huaweis service delivery platform (SDP) in its Latin American
operations World and now plans to deploy the software globally. The
SDP fits Telefonicas application development August 2010 strategy
by establishing a foundation for these services to be created. Tata
Teleservices Tata Teleservices installed Huaweis MSC Pool solution,
boosting service and reliability for the India operators 1.5
million subscribers in the Mumbai metro area. August 2010 Huawei
deployed its 40G Optical Transport Network solution for PCCW,
allowing PCCW customers to experience higher bandwidth and more
flexible service features. Transport capacity increases to 3.2
PCCWTerabit and bandwidth per wavelength jumps 400% with the use of
technologies like 80-wavelength Hong Kong 40G, Reconfiguration
Optical Add/drop Multiplexer, and optical and electrical
cross-connection. August 2010 In a separate agreement also
announced in August, Huawei deployed its 42Mb/s Dual Carrier HSPA+
solution, doubling the downlink peak data rate of PCCWs existing
HSPA+ network covering Hong Kong. SingTel SingTel deployed Huaweis
NE5000E 1+2 router cluster system in its converged IP backbone
network. Singapore This router system, the industrys most
energy-efficient, achieves 2.56T port capacity and is scalable to
August 2010 200T. Huawei was selected by China TieTong
Telecommunications, a subsidiary of China Mobile, to China TieTong
exclusively provide equipment for the expansion of the operators
CTTNET nationwide broadband IP China network. Huawei is supplying
its Quidway NetEngine5000E core router, which achieve 2.56T port
August 2010 capacity and are scalable to 200T. StarHub StarHub
adopted a smartphone signaling solution from Huawei that enhances
network performance Singapore by reducing smartphone signaling
traffic. The solution reduces 56% of the redundant signaling loads
in July 2010 StarHubs smartphone mobile data service. Vodafone
selected Huawei and Ericsson to upgrade its base stations to LTE
and roll out LTE-compatible Vodafone base stations across rural
regions of Germany. In all, Vodafone plans to have 1,500 base
stations Germany installed by 2011. Vodafone Germany is embracing
wireless broadband as a less expensive alternative July 2010 to
rolling out fixed line access for Internet services.46 Huawei 4Q10
| Network Business Quarterly2011 Technology Business Research, Inc.
47. Appendix Customer Deals TBR Huawei Recent Customer Deals
(continued) Company Scope of Deal ONO selected Huawei to upgrade
and run its voice network under a seven-year renewable contract.
ONO Huawei will deploy softswitches, media gateways and other IMS
solutions. Huawei will also provide Spain managed services for the
network, taking on 40 ONO employees to help with activity
monitoring, July 2010 workflow management and configuration
management. Huawei will deploy HSPA+ and LTE base stations for
Italian operator Wind. Wind selected Huaweis Wind SingleRAN
platform because it can converge GSM, HSPA and LTE RAN onto one
platform. The operator Italy will also purchase core network
equipment supporting SDH and VoIP and IMS infrastructure from June
2010 Huawei to support its all-IP strategy. Suddenlink Deploying
Digital Terminal Adapters (DTA) from Huawei to offer more Video on
Demand, HDTV, and Communications Docsis 3.0 services. Suddenlink is
an MSO with about 1.3 million customers and the DTA boxes will be
United States offered to its customers across 20 markets in the
southeastern United States. June 2010 VodafoneVodafone Spain is
offering femtocells manufactured by Huawei to its Office customers,
which include Spain 25,000 companies with over 500,000 lines across
Spain. The femtocells enable Vodafones customers June 2010 to
realize better voice and data access. Huawei will deploy its IPTime
broadband metro solution for Brazilian cable and broadband provider
NET NET. The deployment will enable high-definition video service
for NET subscribers using video packet Brazil retransmission and
fast channel change, which are part of Huaweis SingleMetro and
Multiplay May 2010 solutions. HiBeam Internet Huawei supplied radio
equipment to HiBeam to support broadband services to subscribers in
the & Voice Midwest and Southeast. Speeds can now reach 3-6
mbps on average, with bursts up to 10 mbps. The United States new
equipment supports migration to LTE. May 2010 Huawei and
vividwireless launched Australias first commercial WiMAX network in
Perth. The network vividwireless delivers wireless access speeds
comparable to ADSL2+ connections using Beamforming and 4T4R
Australia technology. The rollout in Perth took six months to build
and Huawei will build out additional WiMAX May 2010 networks for
vividwireless in 2H10.47Huawei 4Q10 | Network Business Quarterly
2011 Technology Business Research, Inc. 48. Appendix Customer Deals
TBR Huawei Recent Customer Deals (continued) Company Scope of Deal
Saudi Telecom Huawei will deploy a pre-commercial LTE network for
STC covering several cities in Saudi Arabia, Company (STC)
including Riyadh and Dammam. Additionally, STC will use Huawei IP
microwave products, specifically Saudi Arabia the RTN900 series, in
its LTE backhaul. April 2010 SaskTel SaskTel is using Huaweis
SingleRAN solution to build out an HSPA+ network in Canada. Huaweis
Canada solution allows smooth migration to LTE. March 2010 MobiTel
MobiTel is paying Huawei $200 million to expand network coverage in
Cambodia, and the deal Cambodia consists of equipment and services.
March 2010 Telefonica O2 Huawei will assume control of field
service and maintenance of Telefonica O2s mobile Germany
communications infrastructure in Germany once it completes the
network expansion. At that time, March 2010220 employees will be
transferred to Huawei. As part of a contract signed with Telenor,
Huawei will deploy a Mobile Backhaul Commercial Network Telenor
Denmark in Denmark. In addition, Huawei will provide its Packet
Transport Network mobile compliant backhaul Denmark solution. The
network will comply with the new industry standard IEEE 1588v2 to
enable an efficient February 2010 LTE conversion. China
UnicomHuawei is expanding China Unicoms China 169 backbone network
by deploying its NE5000E cluster China router system, which will
provide four new backbone nodes in Chengdu, Xian, Chongqing and
February 2010 Wuhan. MobileOne (M1) Huawei will provide an ATCA
platform-based IMS solution for M1, so the operator can offer VoIP,
Singapore IPTV, Centrex and HD video conferencing to its
subscribers in Singapore. January 201048 Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 49.
Appendix Customer DealsTBRHuawei Recent Customer Deals (continued)
Company Scope of Deal LPTIC Huawei Marine Network was contracted by
the Libya Post Telecommunication and Information Libya Company to
lay 177 km of T-E submarine optical fiber cable, with 3.2 Tbit/s of
capacity, connecting January 2010Tobruk and Emasaed in Libya. China
Telecom Huawei deployed two CDMA2000 1x EV-DO Rev. B networks in
Beijing and Guangzhou for China China Telecom. The 3G networks,
which operate in the 2.1 GHz and 800 MHz dual-band frequencies,
will allow January 2010China Telecom to offer its subscribers VoIP,
VoD and streaming media. GlobeNet will use Huaweis OSN 6800 NG-DWDM
OTN optical platform hardware to connect its cable GlobeNet landing
station in New Jersey to points of presence in New York, Brazil,
Venezuela, Bermuda and Florida. Americas The platform supports 10
Gbps, 40 Gbps and 100 Gbps wavelengths. Huawei will also upgrade
the January 2010 software on GlobeNets existing iManager T2000
Network Management System. UGL Limited Huawei will supply UGL
Limited with a GSM-R solution that will cover 1,455 km of track and
70 km of Australia rail tunnels across the Sydney metro network.
UGL, a rail engineering firm, was awarded $225 million in January
2010December to design, install and manage a digital train radio
system on RailCorps electric rail network. Zain Nigeria Huawei
installed a blade mobile softswitch for Zain that will cover 8
million customers in Nigeria. January 2010 MTN Huawei deployed a
UMTS900 platform on MTNs network in Ghana. The platform, which is
based on Ghana Huaweis 3900-Series Node B, operates in the 900 MHz
frequency and will operate in conjunction with January 2010MTNs GSM
network. Omantel OmanOmantel will pay Huawei $26 million to expand
coverage of its fixed line network in Oman. January 201049 Huawei
4Q10 | Network Business Quarterly 2011 Technology Business
Research, Inc. 50. Appendix Facilities TableTBR Huaweis Facilities
Location Function Shenzhen, ChinaChinese Headquarters, East Pacific
Headquarters Dusseldorf, GermanyEuropean Headquarters, Innovation
Center Darmstadt, Germany Innovation & Demo Center Moscow,
Russia CIS Headquarters Plano, Texas, United StatesUnited States
Headquarters Markham, Ontario, Canada Canadian Headquarters Cairo,
Egypt Middle East and North Africa Headquarters Sao Paulo,
BrazilLatin American Headquarters Johannesburg, South Africa South
African Headquarters Kuala Lumpur, Malaysia Asia Pacific
Headquarters Richardson, Texas, United States LTE Laboratory
Otemahci, Tokyo, Japan LTE Laboratory50Huawei 4Q10 | Network
Business Quarterly2011 Technology Business Research, Inc. 51.
Appendix Facilities TableTBR Huaweis Facilities (continued)
LocationFunction Beijing, ChinaR&D Facility, WiMAX
Interoperability Testing Laboratory Shenzhen, China R&D
Facility Shanghai, China R&D Facility Nanjing, ChinaR&D
Facility Hangzhou, China R&D Facility Chengdu, ChinaR&D
Facility Munich, Germany R&D Facility All-IP Network, Core
Network, High-speed Transmission Paris, France R&D Facility
Telecom Standard, GSM-R Milan, ItalyR&D Facility Microwave
Stockholm, Sweden R&D Facility Bangalore, IndiaR&D Facility
Software Dallas, Texas, United StatesR&D Facility ASIC
Technologies and Wireless Algorithm Silicon Valley, California,
United States R&D Facility Ottawa, CanadaR&D Facility
Wireline, Wireless, Optical, and IP Networking Moscow,
RussiaR&D Facility Wireless Algorithm, Application and Software
Lagos, NigeriaR&D Facility Istanbul, TurkeyR&D Facility
South AfricaR&D Facility Jakarta, IndonesiaR&D and Training
Facility51Huawei 4Q10 | Network Business Quarterly2011 Technology
Business Research, Inc. 52. Appendix Management TableTBRHuawei Key
Management NamePosition Ren ZhengfeiChief Executive Officer Justin
Chen Chief Operating Officer Matt BrossChief Technology Officer Ken
HuExecutive Vice President Wan BiaoPresident of Wireless You
YiyongPresident of Access Network Christian ChuaPresident of
Transport Network Kevin Tao CEO of Huawei Device Ying Weimin
President of LTE Product Line Yu ChengdongPresident, Huawei Europe
Max YangCEO, Huawei India Charles DingPresident, Huawei North
America Sean Yang President, Huawei Canada Charlie ChenSenior Vice
President of Marketing and Product Management, Huawei USA John
RoeseSenior Vice President and General Manager of North America
R&D52 Huawei 4Q10 | Network Business Quarterly 2011 Technology
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