Huawei Sees Slowest Growth in Years as It Takes on Apple

(Bloomberg) — Huawei Technologies Co. warned of its slowest revenue growth since 2013, despite making headway against Apple Inc. in global smartphones.

Revenue at China’s biggest telecommunications gear maker probably rose 15 percent to 600 billion yuan ($92 billion) in 2017, rotating Chief Executive Officer Ken Hu said in a letter to staff posted on the company’s verified WeChat account. That’s down from 2016 when sales jumped 32 percent. The company shipped 153 million smartphones.

Shenzhen-based Huawei has used a vast cash-generating networking business to bankroll a successful foray into smartphones, using high-end but affordable devices to push aside local rivals such as Oppo and Xiaomi Corp. Together with local peers, it’s played a critical role in squeezing Apple and Samsung out from the country’s top sellers, though Apple is now counting on the iPhone X to help it win back status-conscious Chinese. But telecoms spending — its biggest source of revenue — is stagnant as construction of next-generation networks hasn’t taken off.

“Our carrier business was affected by market investment trends but remains stable,” Hu, one of several Huawei executives who take up the CEO’s post on a rotating basis, wrote in his memo. “The market’s fluctuations makes us more determined to team with carriers to explore and grasp” future opportunities.

Huawei’s consumer group, which sells devices including smartphones and smartwatches, is expected to see revenue grow 30 percent to 236 billion yuan in 2017, according to a separate memo from Richard Yu, head of the business.

Founded in 1987 by former army engineer Ren Zhengfei, Huawei has grown into one of China’s largest and most diverse private corporations.

Huawei’s now stepped up an expansion into overseas markets such as Europe and is said to be in talks with U.S. carriers about selling its phones on Apple’s home turf. Ranked third globally, the Chinese company took 10.4 percent of global shipments in the third quarter versus its U.S. rival’s 12.4 percent, according to research firm IDC.

The Chinese brand is steadily moving deeper into higher-end phones, selling devices priced as high as 8,999 yuan.

Huawei’s CEO didn’t discuss profitability or give division specifics in his memo, which precedes a more comprehensive results report. But it’s said it wanted to keep a closer eye on the bottom line. The company barely grew earnings in 2016 and has said it must reduce operational expenses. In last year’s letter, then-CEO Eric Xu pledged to re-tool management’s approach and avoid “blind optimism and rhetoric.” Counterpoint Research estimates Huawei grabbed 4.9 percent of global handset profits in the third quarter, ahead of its Chinese rivals but still lagging Apple and Samsung.

The end-of-year messages come just days after the company said the head of sales for its China consumer business has been detained in a corruption probe.

“We were disappointed to see that there are still employees and managers who were turned over to judicial authorities this past year,” Yu said. “I would like to stress, once again, that the company has zero tolerance for corruption. Do not take chances.”

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