Bottom line: Huawei’s new push into IT services could do well due to the company’s strong background in telecoms products, and could see it form a major partnership in the area with a big global player.
Networking equipment giant Huawei is continuing its diversification, with word that it’s planning a major push into the market for information technology (IT) services that could put it into direct competition with such giants as IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ). But perhaps more intriguing is the possibility that Huawei could form a major partnership with one of the big foreign names, amid a rise in such pairings due to restrictions on foreign firms under China’s new national security law.
Huawei began its life as a maker of networking equipment for big telecoms carriers, but more recently has tried to diversify as the global market for those products slows. It has pushed into networking equipment for enterprises, and more recently has found growing success with smartphones. But IT services has remained a relatively small portion of the business, expected to reach $2 billion in sales this year. That would be just a tiny portion of the 288 billion yuan, or about $45 billion, that Huawei posted in revenue last year. Read Full Post…
Less than 2 weeks after HiSoft (Nasdaq: HSFT) and VanceInfo (NYSE: VIT) announced their landmark merger agreement, we’re getting word of another significant acquisition in the IT outsourcing space with a new purchase plan by China-listed Beyondsoft (Shenzhen: 002649). The rapid announcement of 2 such major deals could indicate that much-needed consolidation is finally coming to this lucrative but highly fragmented industry, which holds the potential to produce major companies that could someday rival big Indian outsourcing firms like Infosys (Mumbai: INFY).
A new mega-merger between China’s two largest software outsourcing firms could lay the foundation for a new global powerhouse in the lucrative IT services sector, marking the second major corporate marriage in China this year between two industry leaders. More of these kinds of marriages are sorely needed to clean up fragmented high-tech sectors marred by rampant competition, but to make that happen many of China’s most vibrant entrepreneurial companies need to lose their mom-and-pop shop mentality and learn to act more like the major corporations they aspire to become.
