Huawei enters 2019 swinging with $108.5 billion revenues

To say 2018 was a rollercoaster ride for Huawei would be somewhat of an understatement, but the New Year’s message from Rotating Chairman Guo Ping is one of defiance.

Ping has proudly stated the business has reached record sales revenues in 2018, $108.5 billion, signed 26 5G commercial contracts with telcos, shipped more than 10,000 5G base stations, tempted 160 cities and 211 Fortune Global 500 companies into digital transformation contracts and shipped more than 200 million smartphones.

The company might have been the antagonist in the Great Security Saga of 2018, but it is still moving in the right direction. That is, for the moment at least. This message from Ping is one of reassurance. Huawei is proactively seeking to engagement the community, promising everything is above board and legitmate. This is a business which is scrapping for its reputation.

“It has been an eventful year, to say the least,” said Ping. “But we have never stopped pushing forward, and as a result our 2018 sales revenue is expected to reach 108.5 billion US dollars, up 21% year-on-year.”

Reading between the lines you have to wonder whether the business is worried about its dependence on the US. Prior to Christmas, Rotating CEO Ken Hu promised the company’s supply chain was in a stronger position than ZTE, and there was no chance a ban from using US components and IP would create the same disaster zone. Ping seems to be reiterating this message.

“In 2019, we will focus on strategic businesses and strategic opportunities and build a more resilient business structure,” said Ping. “We will continue to optimize our product investment portfolio to achieve end-to-end strategic leadership. As part of this, we need to retain products that are competitive and appealing and phase out those that aren’t.”

Huawei are in a worrying position right now, teetering on a knifes edge. On one side, you have an incredibly successful and innovative business, with a proven track record of delivering results and a culture of account management rivalled by few. This is a vendor a lot of telcos will want to work with. However, with the echoes of accusation getting louder, governments excluding it from 5G bonanzas and the possibility of being banned from using any US goods in its supply chain, some will naturally be nervous about entering into any commercial contract.

The security concerns which plagued Huawei for the majority of 2018, accelerating in the final quarter, look like they will continue over the next couple of months but there hasn’t been an immediate impact on the business just yet. With numerous contracts already secured, Huawei is certainly not going to disappear from the connectivity landscape, but in choosing not to mention any financial predictions for 2019, Huawei has effectively stated what we are all thinking; its dominance is coming to an end.

Looking at the major vendors across the 4G era, the story was relatively clear; Huawei freely counted the cash at the expense of others, most notably Ericsson and Nokia. This will not be the story for 5G as more telcos look for greater diversity in the supply chain and governments place more scrutiny on Huawei, as well as Chinese vendors in general. Perhaps there will not be such a clear winner in the 5G era, with the bounties being more evenly spread throughout the ecosystem.

Huawei is promising to be more secure, more transparent and more innovative than competitors, and it needs to be. But we suspect the damage has already been inflicted. Success seems to have been the downfall for Huawei, forcing the company into the limelight and raising its profile so much questions were bound to be asked. Huawei will certainly continue to be a heavyweight in the connectivity industry, but its era of such spectacular dominance seems to be over.

Ericsson picks a new Chairman

The Nomination Committee is proposing former Atlas Copco CEO Ronnie Leten as the new Ericsson Chairman, replacing Leif Johansson.

Leten headed up Swedish industrial equipment maker Atlas Copco for eight years, during which its share price seemed to have out-performed the market. Ericsson’s share price, by contrast, has halved in the last couple of years. The 60-year-old Leten stapped down as CEO earlier this year and will also relinquish his chairmanship of Electrolux to take this gig.

This would appear to complete the executive overhaul of Ericsson by its largest shareholder – Investor AB – which owns almost a quarter of its voting rights. Current CEO Börje Ekholm used to be CEO of Investor AB and, by bizarre coincidence, Investor AB has a similar proportion of the voting rights of Atlas Copco. It seems to have taken a few pages from the Vivendi playbook.

The Chairman of the Nomination Committee is, of course, Johan Forssell, who just happens to be CEO of Investor AB. “The Nomination Committee believes that in Ronnie Leten, we have found the right person to assume the position as Chairman in Ericsson, providing experience and competence that will benefit the company,” said Forssell.

“Ronnie Leten has a very strong track record when it comes to value creation. Mr Leten is a very skilled businessman, technically savvy and strategically versatile. Furthermore, he has significant experience from digitalization of major operations, which will be beneficial for Ericsson’s focused work together with its customers.

“In addition, the Nomination Committee proposes Kurt Jofs as a new member of the Board. With Mr Jofs’ deep knowledge of and background from the telecom and IT-industry, not least from his previous tenure at Ericsson, we believe that he will contribute complementary skills and experience to Ericsson’s Board. With these changes, the Nomination Committee believes that the company is given the right conditions for realizing its long-term potential.”

Jofs is currently Chairman of Finnish IT services company Tieto and incongruously seems to have no direct link to Investor AB. He was, however, Networks EVP at Ericsson from 2003-2008 and is Swedish, so seems qualified on paper. One thing that is worth noting is that Cevian Capital is both the largest single shareholder in Tieto and also represented on the Ericsson Nomination Committee.

So both the CEO and the Chairman (presuming the formality of his shareholder approval is completed) of Ericsson seem to have been put in place by Investor AB, presumably with the blessing of other significant shareholders. This is probably as it should be, but they surely now have no grounds for complaint if the company fails to turn things around.