The birth of a giant: Huawei report profit rises for 2014

2014 was a good year for Huawei. Despite continued resistance in the US from some government departments, it has not only built out its global business but continued to make inroads into the lucrative US IT market. In its 2014 annual report issued today, the company has reported revenue, operating profit and cash flow from its operating activities at an all time high.

The raw numbers from the report show:

The only slight blot on these numbers is that the operating margin dropped from 12.2 per cent to 11.9 per cent over the year.

A closer examination of the consolidated report shows that Huawei is currently sitting on CNY78.048 billion (£8.489 billion) in cash and cash equivalents. When asked at CeBIT what its plans were for acquisitions Mr. Zheng Yelai (Leaf Zheng), President, IT Product Line, Products and Solutions, Huawei chose not to comment.

With HP's continued struggle, it will be interesting to see if Huawei decides that a move for HP enterprise business would be the right move. This would give Huawei its own cloud business especially in China and emerging countries where cloud adoption is racing ahead of many Western economies. It would also gain a significant position in enterprise networking which would help it drive its own SDN and NFV business. Finally, such a deal would give it access to a very large portfolio of patents.

What is important for Huawei is that unlike other IT giants such as IBM, HP and Lenovo, its is showing improvements in all of its business units. The carrier business in which is investing heavily was up 16.4 per cent. Meanwhile the enterprise business which includes relationships with other IT giants such as SAP was up 27.3 per cent setting a significant benchmark in a market where most companies are struggling to get into double figure growth.

Alongside all of this the consumer business which has seen the introduction of new smartphones and tablets grew at a staggering 32.6 per cent. Huawei is now selling into over 60 countries and has made the transition into the high-end smartphone and tablet market. Much of this growth however is from a very low base and it will take a few years to see if Huawei can build a consumer business to rival the likes of Samsung.