Huawei A Growing Challenge For Cisco Systems, Inc. (CSCO)

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Huawei Technologies Co. Ltd., who recently released its 2013 results, continues to grow faster than its rivals. Robust performance from its Consumer and Enterprise segments helped the Chinese networking company post sales growth of 8.6% in 2013 versus 7.9% in 2012, says a report from Raymond James on April 1, 2014 by analysts Simon Leopold, Tavis C. McCourt, Victor Chiu and Georgios Kyriakopoulos. Compared to its western competitors, the Chinese vendor fared much better.

Better performance than rivals

For the same period, Alcatel Lucent SA (NYSE:ALU) and Ericsson sales were flat while Cisco Systems, Inc. (NASDAQ:CSCO) witnessed a growth of only 1.3%, and Nokia Siemens Networks (now Nokia Solutions and Networks) experienced a decline of 18.2%.

For 2013, Huawei’s enterprise sales increased by 33% from 26%, last year. Huawei Technologies Co. Ltd. with $2.4 billion sales in the enterprise sector, is a relatively smaller player compared to the likes of Cisco with sales over $30 billion. However, compared to other established players like Juniper Networks, Inc. (NYSE:JNPR) with sales of $1.6 billion, the Chinese firm is relatively large. This is a big achievement, considering the company only came out with its Enterprise business unit in 2011.

Sales of Huawei’s Carrier Network unit improved 3.9% to $26.6 billion or 70% of revenue. The Chinese vendor is behind only Ericsson (sales of roughly $35 billion), in the carrier segment. Compared to other western competitors like Alcatel Lucent SA (NYSE:ALU) with sales of $20 billion, and Nokia Siemens Networks with sales of $17.8 billion, Huawei Technologies Co. Ltd. is way ahead. Analysts expect the Chinese vendor to grow at a faster pace than peers owing to the China 4G mobile upgrades.

Huawei a threat to Cisco

Presently, Cisco Systems, Inc. (NASDAQ:CSCO) is facing stiff challenges in China and in few other emerging markets, which presents a good opportunity for Huawei to expand its operations. In the enterprise space, the Chinese firm offers an impressive range of products including servers, switches, routers, storage and telepresence. The company also provides solutions for cloud and efforts to support software-defined networking.

Huawei Technologies Co. Ltd. 2013 numbers provide a mixed feeling for competitors, according to analysts. Alcatel Lucent SA (NYSE:ALU), Cisco Systems, Inc. (NASDAQ:CSCO), Ericsson (NASDAQ:ERIC), and Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)  will benefit from Huawei’s strategic shift “toward profitability over market share,” believe analysts. Also, the geographic growth trends reflect that western vendors will struggle to sell their offerings in China, and Chinese vendors will find hard to sell in the U.S. However, analysts believe that Huawei’s “rapid enterprise growth illustrates a growing challenge for Cisco.”

About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at