Huawei near to overtaking Ericsson, posted 11% profit in the Q1 2011

China's Huawei Technologies Co Ltd, the world's No.2 network equipment maker, posted an 11 per cent rise in its first-half sales as it closes in on market leader Ericsson.

Huawei, one of China's best-known names in the technology sector, faces a weak global economy due to U.S. and European debt woes that could hamper telecom spending worldwide.

However, it aims to rely more on sales of its MediaPad tablet PCs and smartphones to spur growth, pitting it against global names such as Apple and Samsung Electronics. The Shenzhen-based company said it was on track to achieve annual sales of 199 billion yuan ($31 billion) for the year, while Ericsson's sales are expected to hit 227.6 billion Swedish krona ($35 billion) this year, according to a consensus forecast by Thomson Reuters I/B/E/S.

Analysts said even though there were global uncertainties, a pickup in spending by Chinese telecom carriers such as China Mobile , China Unicom and China Telecom, could help Huawei in the second half. "Some of the major telecom projects in China that were planned for this year were delayed to the second half," said Kelvin Ho, an analyst at Yuanta Securities in Shanghai. "So maybe first half results for some of the equipment vendors, especially the Chinese ones, may not be as good as one might have originally expected."

Huawei reported first-half sales of 98.3 billion yuan ($15 billion), up 11 per cent from a year earlier, it said in a statement on Monday, with its sales performance lagging some competitors.

Ericsson's sales in the first half were up 16 per cent to 107.7 billion Swedish krona, while smaller Chinese rival ZTE Corp's operating revenue rose 21.6 per cent to 37.35 billion yuan during the same period.

Unlisted Shenzhen-based Huawei, which is announcing interim results for the first time, reported an operating profit of 12.4 billion yuan for the first six months, although it did not provide comparison figures. 

Huawei has been trying to increase its disclosure practices to shed its previously secretive image formed by its low-profile founder and CEO, Ren Zhengfei, a former Chinese military officer.

"Although the global economy continues to face uncertainty, we remain confident of achieving our annual sales target of 199 billion yuan with our device and enterprise businesses as new growth drivers," the company's chief financial officer, Cathy Meng, said in a statement.  

Huawei derives its revenue mainly from network equipment sales, but has been actively marketing its consumer devices because of fast-growing global demand in smartphones and tablet PCs.

Huawei Device, the division that sells cellphones, wireless cards and tablet PCs, posted a 40 per cent rise in shipments to 72 million units, with sales up 64 per cent at $4.2 billion.

That $4.2 billion translates to a 28 per cent contribution to total first-half sales. Last year, annual sales of its consumer devices division made up less than 20 per cent of total sales.

©EconomicTimes