Huawei Technologies, one of China’s most successful exporters but also one of its most frustrated, is following in the footsteps of crosstown rival ZTE (HKEx: 763; Shenzhen 000063) in discovering cellphones, a far less controversial product than its traditional networking equipment business. The move looks like a smart one for Huawei, even if the company is a little late coming to this product area, with many interesting implications. Chinese media are quoting an executive saying Huawei is aiming to become one of the world’s top 3 cellphone makers within the next 5 years — a big order for a company that is currently just a minor player but certainly not impossible for one with Huawei’s vast resources. (Chinese article) Equally significant was where the executive made his remarks, namely at the Consumer Electronics Show (CES) last week in Las Vegas, the world’s largest consumer electronics show that Huawei was attending for the first time. The new push will add an interesting new competitor to the market, posing a challenge not only for domestic rivals like ZTE and Lenovo (HKEx: 992), but also for foreign companies like Motorola Mobility (NYSE: MMI) and even faded global leader Nokia (Helsinki: NOK1V). Huawei is no doubt finally realizing that cellphones are far less sensitive as a product than its core telecoms equipment business, which is showing signs of quickly slowing amid resistance in western markets like the US, where security is a concern (previous post), and even in India, where a corruption scandal has brought the industry to a standstill. (previous post) As a product area, cellphones are also far less cyclical than traditional networking equipment, whose sales tend to spike when new technologies like 4G or wi-fi come out, but then subside afterwards. Lastly and perhaps most interesting, the development of a strong cellphone business could provide Huawei with an opportunity for something that’s been talked about for years but has never happened, namely a Huawei IPO. Huawei tried to sell of its cellphone business several years ago but failed after it didn’t get the price it wanted. But that business was very small at the time, making it not very attractive to outside buyers. If it was one of the world’s top 3 players, on the other hand, it would certainly become a much more attractive candidate for an international IPO, finally giving investors a chance to buy into this interesting buy controversial company.
Bottom line: Huawei’s new drive into cellphones could create a major new global player in a short time, with a potential IPO for the unit in the next 5 years if the drive is successful.
Related postings 相关文章:
◙ Huawei Puts Brakes on India Drive 华为印度建厂计划推迟
◙ US China Bashing Hits New High With Telecoms Probe 华为中兴应巧选时机应对调查
) Since then, however, its shares have lost about two-thirds of their value, and its market cap now stands at just under $14 billion, or well below Nokia’s $18.7 billion despite Nokia’s own sharp share decline in recent months. In this latest twist for HTC, a Taiwan prosecutor is saying that HTC submitted its criminal complaint back in August, and the prosecutor’s office is now processing the matter. It strikes me as a little strange that HTC is trying to lay some or all of the blame for its rapid decline on Citi, as the company has been the main architect of its tumble by twice reducing its earnings outlook recently as its smartphones struggled to compete in the increasingly competitive smartphone space with popular models from Apple (Nasdaq: AAPL), Samsung (Seoul: 005930) and others. HTC has also been hobbled by a series of lawsuits against it by Apple, which is accusing it of intellectual property theft through its use of Google’s (Nasdaq: GOOG) popular Android operating system. Those lawsuits could ultimately prove a huge setback if US courts find in Apple’s favor, which would force HTC to stop selling some or all of its Android phones in that critical market. With all those factors working against it, perhaps HTC should take a step back and realize that the blame for its rapid decline lies squarely inside its own house, rather than on outsiders like Citi. If it’s smart, it will quietly drop this lawsuit against Citi, and focus its energies on pouring more resources into R&D and sales, and perhaps even find an alternative to Android to try and regain some of its fast fading luster.
New signals coming from Lenovo (HKEx: 992) and Taiwan smartphone maker HTC (Taipei: 2498) indicate that both are strongly considering bids in the upcoming auction of Hewlett-Packard’s (NYSE: HPQ) PC business, which also happens to include its much smaller smartphone unit. But whereas HTC’s potential bid looks smart, Lenovo’s apparent position needs some serious rethinking. Let’s start with the simpler case of HTC, whose early bet on smartphones has made it an overnight sensation, propelling it past a struggling Nokia (Helsinki: NOK1V) earlier this year in terms of market value. (
With its new top management now firmly running the show, China Mobile (HKEx: 941; NYSE: CHL) continues to embrace its previously neglected 3G network, preparing to roll out a large new array of handsets that will work on the system using a homegrown mobile standard. Local media are reporting that China Mobile is preparing to launch some 30 new 3G handsets for its TD-SCDMA system, covering a wide range of price-points and models from nearly every major manufacturer, including Nokia (Helsinki: NOK1V), Samsung (Seoul: 005930) and BlackBerry (Toronto: RIM), as well as homegrown players ZTE (HKEx: 763; Shenzhen: 000063) and Huawei. (
While the rest of the world buzzes about Google’s (Nasdaq: GOOG) blockbuster deal to buy Motorola Mobility (NYSE: MMI), eyes in China are more focused on a worrisome report regarding struggling Nokia (Helsinki: NOK1V), which once dominated the Chinese market but is rapidly losing share to up-and-comers like Apple (Nasdaq: AAPL) and Samsung (Seoul: 005930). According to the report, a growing number of Chinese sellers are refusing to accept shipments of Nokia phones, in what looks like a rebellion after years of being bullied by Nokia when it dominated both the China and global markets. (
What a difference a couple of years makes. Apple (Nasdaq: AAPL), a tiny player in China as little as two years ago, has suddenly become a new dominant force in both China’s computing and cellphone scene, taking on traditional market leaders Lenovo (HKEx: 992) and Nokia (Helsinki: NOK1V.HE) in their respective spaces. The US maker of wildly popular iPhone cellphones and iPad tablet PCs officially surpassed Lenovo in terms of total China sales in the quarter through June (
