Huawei Being Close to Ericsson but Far Away from Cisco

Published on November 27, 2009 by Rebecca | This story has been viewed 1,340 times

On the road of climbing to the peak of world-class enterprises, Huawei beats an important rival again. According to the data recently released by the market research firm Dell’Oro, Huawei has surpassed Nokia and Siemens to become the second-largest telecom equipment supplier in the global telecom equipment market. As of this third quarter, Huawei’s share has risen to 20% from last year’s corresponding figure of 11%, and leaped into second place; while Ericsson continues to take first place with a share of 32%.

At present, Huawei’s direct aim is to compete with Ericsson. Among telecom equipment manufacturers, Ericsson has not only maintained its boss position in revenue and market share for many years, but also has strongest capacity of profitability. However judging from development momentum of Huawei, it is promising for Huawei to prevail over Ericsson in term of scare. In recent years, since Huawei’s growth has always been higher than Ericsson, its sales revenue continually approximates to Ericsson’s: in 2004, Huawei’s sales revenue was $3.827 billion, while Ericsson 132 billion Kronor (about $17.16 billion at the exchange rate by the end of 2008); in 2008, Huawei $18.33 billion, and Ericsson 208.9 billion Kronor (about $27.16 billion). If both sides keep growth at the current rate, Huawei will be able to transcend Ericsson in term of revenue in 2 years.

Of course, Ericsson will not wait for Huawei’s chasing, and their “seesaw battle” will get more acute. Ericsson has recently completed a $1.13 billion purchase transaction of CDMA and LTE assets of the Canadian insolvent company Nortel Networks, and further strengthened its leading market position. Huawei has taken the new-generation LTE mobile networks as a strategic key. What’s more, Huawei recently beat Ericsson and won the contract of construction MAGNET in Norway, which will replace the old network constructed by Nokia and Siemens. This deal is the largest LTE transaction in European market so far.

Although the distance is getting closer, it is still not easy to exceed. In the business layout, Huawei has a broader business line, which is conducive to seize more market opportunities and wide business scale. But there is some gap between Huawei and Ericsson — Huawei inadequately focuses on business, whose specialized business is less prominent. In addition, compared to the century-old Ericsson with a 133-year history, Huawei still lags far behind Ericsson in comprehensive strength such as management, brand and cultural foundation. Huawei mainly depended on products cost-effective and rapid execution before, but now it increasingly matches directly with the “peak” enterprises like Ericsson. Thus, the function of “soft power” such as management, brand and cultural foundation will be more projected.

However, the officers of Huawei believe that Ericsson “is there”, and it is not a difficult aim for Huawei to surpass Ericsson. The management innovations of finance transformation in Huawei are goning on for emulating the world-class companies such as Ericsson in “soft power”.

At one time, Cisco was “very close” to Huawei who became a threat to Cisco, which is the background in January 2003 when the case of Cisco suing Huawei for infringing intellectual property occurred. At that time, Huawei was once called the “the nightmare of Chambers”; but Cisco got away from the Huawei “nightmare” long ago, and successfully switched to high-margin domain. Cisco’s competitors are now no longer Huawei, but Microsoft, Google, Hewlett-Packard, even IBM and other new rivals. Since fewer and fewer elements in common between Huawei and Cisco’s business, their competition is no longer in the same level.

Under the general trend of ICT fusion, Cisco, Alcatel and other telecom equipment giants have turned to industry-enterprise networking market. At the same time, HP, Microsoft and other IT companies are penetrating through telecom industry, based on which HP acquired 3COM.

Two years ago, Huawei tried to join Bain Capital to acquire 3Com at the price of $2.2 billion but failed because of the US government’s concerning about national security. It may be able to narrow the distance with Cisco if Huawei successfully purchased 3COM, but unfortunately HP took 3COM at last. Huawei’s business is now still focused on telecom network, while enterprise network business is very small and limited. On the way of ICT integration progress, the gap between Huawei and Cisco is growing, and there is a long way to chase after Cisco for Huawei.

Shenzhen Post Rebecca Contributes to the Story.

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