Vodafone ditches Kiwis and cuts dividend in search of ‘financial headroom’

Vodafone has announced the sale of its New Zealand arm and a cut to the dividend as the firm searches for breathing room on the spreadsheets amid its Liberty Global acquisition and annual loss.

Such is the precarious position Vodafone is under, a cut to the dividend was expected by many analysts, though the sale of its Kiwi business unit compounds the misery. Facing various challenges around the world, including expensive spectrum auctions in Europe, the telco giant is searching for financial relief, though whether these moves prove to be adequate remains to be seen.

“We are executing our strategy at pace and have achieved our guidance for the year, with good growth in most markets but also increased competition in Spain and Italy and headwinds in South Africa,” said Group CEO Nick Read. “These challenges weighed on our service revenue growth during the year, and together with high spectrum auction costs have reduced our financial headroom.

“The Group is at a key point of transformation – deepening customer engagement, accelerating digital transformation, radically simplifying our operations, generating better returns from our infrastructure assets and continuing to optimise our portfolio. To support these goals and to rebuild headroom, the Board has made the decision to rebase the dividend, helping us to reduce debt and deliver to the low end of our target range in the next few years.”

While the news of a dividend cut saw share price drop by more than 5%, trading prior to markets opening has seen a slight recovery (at the time of writing). The dividend cut is not as drastic as some had forecast, down to 9 euro cents from 15, while an additional €2.1 billion from the New Zealand sale will provide some relief.

Looking at the financials for the year ending March 31, group revenues declined by 6.2% to €43.666 billion, while the operating loss stood at a weighty €7.644 billion. This compares to a profit of €2.788 billion across the previous year, though there are several different factors to take into consideration such as the merger with Idea Cellular in India and a change in accounting standards.

The loss might shock some for the moment, though this is likely to balance out in the long-run. In changing from the IAS18 accounting standard to IFRS15, Vodafone is altering how it is realising revenue on the spreadsheets. From here on forward, revenues are only reported as each stage of the contract is completed. It might be a shock for the moment, but more revenue is there to be realised in the future.

Although these numbers are the not the most positive, there is a hope on the horizon.

“The dividend cut is a massive blow for investors, while the results highlight the on-going challenges facing the company in its quest to turnaround its fortunes,” said Paolo Pescatore of analyst firm PP Foresight. “All hopes seem to be pinned on 5G, but the business model is unproven. Huge investment is required to roll out these new ultra-fast networks, but it comes at a cost.”

On the 5G front, Vodafone UK has announced it will go live on July 3, initially launching in seven cities, with an additional 12 live by the end of the year. Vodafone will also offer 5G roaming in the UK, Germany, Italy and Spain over the summer period. Interestingly enough, the firm has said it will price 5G at the levels as 4G.

Although this is a minor consolation set against the backdrop of a monstrous loss, it is at least something to hold onto. As it stands, Vodafone is winning the 5G race in the UK, while the roaming claim is another which gives the firm something to shout about. Vodafone is not in a terrible position, though many will be wary of the daunting spectrum auctions it faces over the coming months.

US drives solid Deutsche Telekom numbers but German 5G auction is a drag

German operator group Deutsche Telekom has reported solid Q1 revenue growth, driven largely by T-Mobile US.

As you can see from the table below, revenues and EBITDA all grew nicely in Q1 2019. Profits, however, went in the opposite direction, apparently due to one-off things like the cost of trying to get the merger between TMUS and Sprint approved. Speaking of the US the second table shows just how much of the revenue growth is attributable to TMUS.

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Revenue 19,488 17,924 8.7 75,656
Proportion generated internationally in % 69.0 66.6 2.4p 67.8
EBITDA 6,461 5,269 22.6 21,836
Adjusted EBITDA 6,901 5,549 24.4 23,333
Adjusted EBITDA AL 5,940 5,487 8.3 23,074
Net profit 900 992 (9.3) 2,166
Adjusted net profit 1,183 1,190 (0.6) 4,545
Free cash flowa 2,370 1,382 71.5 6,250
Free cash flow ALa 1,557 1,318 18.1 6,051
Cash capexb 3,827 3,139 21.9 12,492
Cash capexb(before spectrum) 3,682 3,076 19.7 12,223
Net debtc 71,876 50,455 42.5 55,425
Number of employeesd 214,609 216,926 (1.1) 215,675

 

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Germany
Total revenue 5,357 5,325 0.6 21,700
EBITDA 1,946 1,915 1.6 8,012
Adjusted EBITDA 2,114 2,082 1.5 8,610
Adjusted EBITDA AL 2,108 2,058 2.4 8,516
Number of employeesa 62,358 64,695 (3.6) 62,621
United States
Total revenue 9,796 8,455 15.9 36,522
US-$ 11,124 10,394 7.0 43,063
EBITDA 3,210 2,360 36.0 9,928
Adjusted EBITDA 3,309 2,332 41.9 10,088
Adjusted EBITDA AL 2,679 2,331 14.9 10,084
US-$ 3,042 2,865 6.2 11,901
Europeb
Total revenue 2,891 2,811 2.8 11,885
EBITDA 1,035 905 14.4 3,757
Adjusted EBITDA 1,059 911 16.2 3,880
Adjusted EBITDA AL 945 898 5.2 3,813
Systems Solutions
Order entry 1,609 1,506 6.8 6,776
Total revenue 1,630 1,665 (2.1) 6,936
Adj. EBIT margin (%) (0.2) (2.3) 2.1p 0.5
EBITDA 79 19 n.a. 163
Adjusted EBITDA 125 57 n.a. 429
Adjusted EBITDA AL 92 60 53.3 442

“We got off to a successful start to the year,” said Tim Höttges, CEO of DT. “Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group.”

Not included in his canned comments, but picked up by Reuters, was Höttges inevitable irritation at the amount of cash DT is having to drop on the interminable German 5G spectrum auction. We’re on round 305 of the bidding, believe it or not, and the total pledged has now reached €5,687,520,000. Expect to hear persistent muttering about how that’s money they can’t spend on infrastructure, etc, before long.

BT reports flat full year numbers but feels bullish about fibre

UK telecoms group BT revealed flat revenue growth on its full year 2018 report, but its new CEO said all the right things about investment.

Revenues were down a percent, but earnings per share were still up 6 percent. Of the business units only the biggest – consumer – showed any growth, with all the B2B units showing small declines. BT expects the 2019 financial year to deliver more of the same, because reasons. It said it has raised its capex guidance to £3.8 billion, but it ended up spending almost £4 billion in the 2018 financial year despite guiding £3.7 billion a year ago.

BT FY 2018 table

“BT delivered solid results for the year, in line with our guidance, with adjusted profit growth in Consumer and Global Services offset by declines in Enterprise and Openreach,” said new Chief Exec Philip Jansen.

“We need to invest to improve our customer propositions and competitiveness. We need to invest to stay ahead in our fixed, mobile and core networks, and we need to invest to overhaul our business to ensure that we are using the latest systems and technology to improve our efficiency and become more agile.

“Our aim is to deliver the best converged network and be the leader in fixed ultrafast and mobile 5G networks. We are increasingly confident in the environment for investment in the UK. We have already announced the first 16 UK cities for 5G investment.

“Today we are announcing an increased target to pass 4m premises with ultrafast FTTP technology by 2020/21, up from 3m, and an ambition to pass 15 million premises by the mid-2020s, up from 10 million, if the conditions are right, especially the regulatory and policy enablers.”

Those infrastructure ambitions are laudable, and were echoed by Openreach CEO Clive Selley, but don’t seem to tally with previous statements on the matter. A year ago Selley said “This year we’ll double our FTTP footprint and by 2020, we will have built it to 3 million homes across the UK. We want to reach 10m premises by the mid-2020s, and believe we can ultimately fully-fibre the majority of the UK under the right conditions.”

So the mid-2020s bit is fine but the 4m promise now has a revised deadline of April 2021, a year and a quarter later than the previous 3m promise. Now we might be missing something here but rather than increasing the target, all BT/Openreach seems to have done is insert another milestone a bit further down the line, which feels a bit deceptive.

“In cut throat market like the UK, there are few opportunities to grow,” said telecoms analyst Paolo Pescatore. “Moves to accelerate plans for its fibre broadband rollout, 5G and cross selling existing services can help increase the group’s bottom line but also require significant investment. The lack of any significant shift in strategy is unsurprising as it’s still early days for Philip Jansen.”

BT is hardly alone in hedging any investment pledge, however vague, with the caveat that it all depends on the regulatory environment. At least it has stopped openly begging for public money, for now. But the barely adjusted capex outlook implies even that pledge is trivial and Jansen might need to test his own investors’ patience with a more aggressive approach once he’s fully up to speed.

Qualcomm banks almost $5 billion from Apple and that’s just the start

In its latest quarterly earnings announcement Qualcomm revealed just some of the cash it’s trousering from Apple after winning their legal fight.

“On April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties,” said the relevant bit of the report. “We also entered into a six-year global patent license agreement with Apple, effective as of April 1, 2019, which includes an option for Apple to extend for an additional two years, and a multi-year chipset supply agreement with Apple.

“While we continue to assess the accounting impacts of the agreements, our financial guidance for the third quarter of fiscal 2019 includes estimated revenues of $4.5 billion to $4.7 billion resulting from the settlement (which will be excluded from our Non-GAAP results), consisting of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities.

“In addition, our financial guidance for the third quarter of fiscal 2019 includes estimated QTL revenues for royalties due from Apple and its contract manufacturers for sales made in the June 2019 quarter.”

Fiscal Q3 for Qualcomm is equivalent to financial Q2, so it covers all the initial payments Apple will make to Qualcomm as a result of their settlement. If you factor in the June quarter sales royalties that wouldn’t otherwise have been paid that should mean Qualcomm’s current account will be around $5 billion better off by the Summer.

There didn’t seem to be any details revealed about the new patent licence agreement, but the two-year backlog points to a historical rate of around $200 million per month. Given the apparently dominant negotiating position Qualcomm will have been in regarding access to its 5G products it’s easy to believe Apple will be handing over a fair bit more than that for the foreseeable future.

There was one other comment of interest in Qualcomm’s outlook. “Our financial guidance for the third quarter of fiscal 2019 also includes $150 million of QTL revenues from Huawei, which represents a minimum, non-refundable amount for royalties due by Huawei while negotiations continue. This payment does not reflect the full amount of royalties due under the underlying license agreement.”

While this is essentially a restatement of the announcement Qualcomm made a quarter ago, it implies the dispute still isn’t resolved. Aside from all this Qualcomm’s Q1 revenues were roughly in line with expectations but a relatively downbeat general outlook drove its shares down a couple of percent.

Apple investors hope short-term pain will lead to long-term gain

16% growth in the steadily growing software and services business seems to be enough to rally investor confidence in the face of declining revenues.

Perhaps this is another lesson Apple can teach the world; how to effectively manage investor expectations. Total revenues are declining faster than the service division is growing, but with a 5.4% jump in share price in overnight trading, Apple investors seem to be buying into the short-term pain, long-term gain message from the technology giant.

For some the earning call might have been a shock to the system, explaining the immediate 1.93% drop in share price before markets closed. Total revenues for the quarter ending March 30 declined to $58 billion, down 5.2% year-on-year, while iPhone revenues dropped to $31 billion, a 17.8% dent in the same shipment figures from 2018. But the services division is the glimmer of hope.

“We had great results in a number of areas across our business,” said CEO Tim Cook during the earnings call. “It was our best quarter ever for Services with revenue reaching $11.5 billion.

“Subscriptions are a powerful driver of our Services business. We reached a new high of over 390 million paid subscriptions at the end of March, an increase of 30 million in the last quarter alone. This was also an incredibly important quarter for our Services moving forward.

“In March, we previewed a game-changing array of new services each of them rooted in principles that are fundamentally Apple. They’re easy to use. They feature unmatched attention to detail. They put a premium on user privacy and security. They’re expertly curated personalized and ready to be shared by everyone in your family.”

Although the Apple DNA is not rooted in the software and services world, this has to be the future. Overarching trends are indicating hardware is becoming increasingly commoditized, refreshment cycles are growing, and consumers are less likely to pay a premium for trusted brands. Apple is a company which defied these trends for a period, though not even the iLeader could deny the inevitable.

This is the critical importance of the software and services division; renewed, recurring and new revenues to replace the increasingly difficult, demanding and diversified hardware world, which is epitomised by the dreary global smartphone market.

Although Apple recently decided against releasing shipment figures during its earnings calls, it is still breaking out the revenues associated with products. The iPhone, the segment which drove growth in recent years, declined by 17.8% year-on-year. Part of this can be pinned on changing consumer behaviour, though you also have to look at the individual markets.

In China, Apple has been struggling. Canalys estimate smartphone shipments in the market have declined 3% year-on-year for Q1, though the locals are turning towards domestic brands. In years gone, Apple was a brand seen as somewhat of a status symbol, though it appears this is a concept which is quickly dissipating as the firm only collected 7.4% of market share over the first three months of 2019, a year-on-year decline of 30%.

Total revenues for China have not declined quite as dramatically, a 21.6% year-on-on-year dip to $10.2 billion, though Apple is not alone. OPPO, Xiaomi and Vivo also saw their year-on-year sales dip, with only Huawei coming out on the up. Here, Huawei managed to grow its shipments by 41%, taking 34% of the Chinese market share for Q1.

Another challenging market for Apple has been India. The story here is more forgiving however, as this is a much more cash-conscious market. Apple will of course want to maintain it position as a premium brand, therefore India, despite all the promise it offers, is not tailor made for its ambitions. Until consumer attitudes shift towards more premium devices, Apple will struggle.

Globally the smartphone market has not been helping either. According to Strategy Analytics, shipments decreased 4% year-on-year for the first quarter, with Apple slipping to third place overall.

Market share Q1 2019 Market share Q1 2018
Samsung 21.7% 22.6%
Huawei 17.9% 11.4%
Apple 13% 15.1%
Xiaomi 8.3% 8.2%
OPPO 7.7% 7%

These figures are not the end of the world, but it is a demonstration of consumer trends. There might still be an appetite for purchasing new devices, though there is seemingly a preference for those brands which might are cheaper. Such is the minimal differentiation between brands these days, why spend a premium when there is little need?

However, there is hope for Apple. Consumers might be getting frustrated over a lack of innovation in the hardware space, leading to longer refreshment cycles and a preference towards cheaper or refurbished devices, but the introduction of 5G might well change this.

With 5G devices being launched consumers will have something different to think about. Although 5G-capable devices are certainly not a necessity, and won’t be for a considerable amount of time, the ability to shout about something genuinely new might reinvigorate consumer appetite for purchasing new, and premium, devices. This could work in Apple’s favour.

That said, with Apple unlikely to release a 5G-capable device until 2020, the next few quarters could also demonstrate similar year-on-year declines. Apple seem to be happy to swallow this decline, sacrificing the ‘first to market’ accolade, but this how Apple traditionally approaches the market; it doesn’t aim to be first, but best.

For the moment, and the long-term health of the company, this does not seem to be the central point however. Apple is seemingly attempting to slightly shift the focus of the business, becoming more reliant on software and services, and it does seem to be working. As you can see from the table below, the ratio is shifting.

Product revenue Services Revenue Ratio
Q2 2019 46,565 11,450 81.3/19.7
Q1 2019 73,435 10,875 88.2/12.8
Q4 2018 52,919 9,981 84.1/15.9
Q3 2018 43,717 9,548 82.1/17.9
Q2 2018 51,947 9,190 85/15
Q1 2018 79,768 8,471 90.4/9.6
Q4 2017 44,078 8,501 85.9/16.1

The results in the table above do look quite confusing, though you have to consider that Q4 is usually the period for Apple’s flagship launch, skewing the figures towards the product segment, while Q1 accounts for Christmas, again tilting the figures. The general trend is looking favourable for the software and services division.

The last couple of months have seen Apple release several new services which will continue to bolster this division also. Whether it’s the content streaming service, news subscriptions, credit cards, iTunes or the App Store, the business is driving more investment and attention to this strange new world of software and recurring revenues. The ratio should continue to balance out, though we strongly suspect it will never get close to parity.

Another factor which you have to consider when it comes to the investors is the monetary gain. Yes, the long-term picture is looking healthier, but the firm has also announced it is increasing the dividend by 5%. This will keep cash-conscious and short-term investors happier, encouraging more to hold onto shares despite the downturn in revenues. The team has also announced a share buy-back scheme, up to $75 billion, which could be viewed as another move to protect share price. Although these could be viewed as short-term measures to cool the market, the overall business is looking healthier.

Apple is recentring the business, with more of a focus on software and services. The firm has defied the global hardware trends for some time, but they do seem to be catching up. What is important however is the management team recognising hardware will not be a suitable floatation device for Apple in the long-run. To continue dominating the technology world, Apple will have to spread its wing further into software, just as it is doing.

And perhaps the most critical factor of this transformation; investors seem to have confidence in the team’s ability to evolve.

Intel admits losing Apple caused it to ditch 5G modems – well duh

Chip giant Intel silenced the non-speculation about it bailing on its much heralded 5G modem project by admitting it was due to losing Apple as a customer.

The scoop comes courtesy of the paywalled WSJ and passed on by The Verge. Intel CEO Bob Swan apparently fessed up to the WSJ saying “In light of the announcement of Apple and Qualcomm, we assessed the prospects for us to make money while delivering this technology for smartphones and concluded at the time that we just didn’t see a path.”

That comment was only a minor elaboration on what Swan said on Intel’s recent earnings call. “As you know, we recently sharpened our 5G focus,” said Swan, in textbook earnings call language. “When it became apparent that we don’t have a clear path to profitability in 5G smartphone modems, we acted. We are now winding down that business and conducting a strategic assessment of 5G modems for the PC and IoT sectors while continuing to meet our current 4G customer commitments.”

Now it’s debatable how much profitability Intel would have derived from its 5G modem sales to Apple if some commentators are to be believed, so the ‘path to profitability’ bit seems like a massive euphemism for ‘likelihood that we will ever deliver a competitive product’ to us. To be fair to Swan there’s no nice way of publicly admitting abject failure so he’s entitled to dance around the issue a tad.

Since it’s now clear that Apple was the only significant customer for its 5G modem and it has apparently deemed it too much of a liability to stick with it’s worth reviewing Intel’s historical pronouncements on the matter.

Intel reckons it has the first global 5G modem

Chip-makers embark on pre-MWC 5G virtue-signalling frenzy

Intel continues to insist it’s really good at 5G

Intel triggered into joining Qualcomm Apple spat

Intel brings forward ‘launch’ of 5G modem in bid to silence doubters

In hindsight it’s all a bit tragic isn’t it? While we don’t doubt Intel genuinely wanted to compete in the modem market it also seems to have been played like a fiddle by Apple. The fruity gadget giant used Intel as a pawn in its hostile negotiations with Qualcomm and dropped it like a bad habit as soon as that became convenient. Cold.

Intel had so little faith in the product of what must have been billions of dollars of effort put into 5G modem development that as soon as its sugar daddy went back to its former partner it pulled the plug immediately. It must surely have seen this coming for a while with all the talk of Apple trying to develop its own modems, so it was just a matter of when it owned up to its 5G failure.

To be honest 5G modems seem to be the least of Intel’s problems right now so it may have been grateful to have ditched that distraction. Swan was forced to also admit Intel was revising down its full year revenue outlook by a whopping $2.5 billion on the earnings call, driving Intel’s shares down 8% at time of writing.

“Our conversations with customers and partners across our PC and data-centric businesses over the past couple of months have made several trends clear,” said Sawn. “The decline in memory pricing has intensified. The data center inventory and capacity digestion that we described in January is more pronounced than we expected, and China headwinds have increased, leading to a more cautious IT spending environment.

“And yet those same customer conversations reinforce our confidence that demand will improve in the second half. So we’ve reassessed our ’19 expectations based on the challenges we’re seeing. Our full year outlook is now $69 billion in revenue, down 3% year-over-year and down approximately $2.5 billion from our previous estimate.”

We had a chat about the Apple/Qualcomm/Intel thing on the most recent podcast, which you can access here.

Huawei increased revenues by 39% in Q1

Chinese telecoms kit giant Huawei defied its critics by raking in loads more cash in the first quarter of this year.

In Q1 2019 Huawei brought in CNY179.7 billion in revenue, up 39% year-on-year. It also trousered 8% of that in profit, which was apparently a slightly better margin than last year. As has been extensively documented Huawei isn’t a public company so it technically doesn’t have to say anything publicly about its business, but is serves a few nuggets up compliance with the International Financial Reporting Standard.

There was some more subtle gloating in the Huawei announcement. By the end of March 2019 Huawei says it had signed 40 commercial contracts for 5G with leading global carriers, which is loads more than Ericsson, and had shipped more than 70,000 5G base globally. It also claims to have shipped more Wifi 6 products than any other company and reckons it shifted 59 million smartphones in Q1.

Of course any Huawei numbers have to be frame by the ‘despite escalating tensions with the US’ proviso, but it must be said it’s not a bad effort to so dramatically increase revenues when facing such geopolitical headwinds. There were no canned quotes or guidance but CNY179.7 billion equates to around $27 billion, while Ericsson’s SEK49 billion is more like $5 billion. Enough said.

Ericsson rides US 5G wave to another solid quarter

Swedish networking vendor Ericsson served up its third quarter in a row of organic growth, thanks largely to the rollout of 5G by US operators.

Chatting to Telecoms.com on her last earnings call before moving on Helena Norrman, Ericsson’s marketing head, flagged up the organic growth as her highlight. The single biggest reason for this growth is the US 5G rollout, she explained, with Ericsson having added US Cellular to the big four MNOs as part of eight new 5G deal winds since we last checked in with it.

Ericsson Q1 5G deal wins

Other than the sales growth Norrman pointed towards the healthy gross margin of 38% (last quarter was abnormally low thanks to its BSS write-down), strong operating income of SEK 4.9 billion, only 1.6 of which was due to exceptional items such as the sale of half of MediaKind and getting RCom to cough up what it owed. This all contributed to a decent cashflow number, so maybe Ericsson will ramping up its investment a bit more.

Ericsson Q1 table

“For the third consecutive quarter we showed organic sales growth, this quarter by 7%, said CEO Börje Ekholm in his comments accompanying the earnings report. “Growth was mainly driven by North America. Our strategy, to work with lead customers in lead markets, is generating both 5G business and hands-on experience in 5G rollout and commercialization. To date we have publicly announced commercial 5G deals with 18 named operator customers, which, at the moment, is more than any other vendor.

“5G services, including mobility, have been launched in South Korea and North America. While Switzerland has released spectrum allowing Swisscom to offer commercial 5G services, using our equipment, the development in other parts of Europe is considerably slower primarily due to lack of spectrum, poor investment climate and additional uncertainties related to future vendor market access.”

Ericsson Q1 segments

Ericsson announced the Swisscom 5G switch-on in a separate press release and the only fly in the ointment from this set of results is the near conclusion of the investigation Ericsson has been under in the US for several years.

As previously disclosed, we have been voluntarily cooperating since 2013 with an investigation by the United States Securities and Exchange Commission (SEC) and, since 2015, with an investigation by the United States Department of Justice (DOJ) into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA),” said Ekholm

“We continue to cooperate with the SEC and the DOJ, and have recently begun settlement discussions. These discussions are in a very early stage and therefore we are not able to estimate their length. Further, as this is an ongoing legal matter we cannot provide any detail. However, based on the current status of the discussions it is our assessment that the resolution of these matters will result in material financial and other measures, the magnitude and impact of which cannot be reliably estimated or ascertained at this time.”

This wasn’t enough to prevent a manor spike in Ericsson’s share price, which was up 3% at time of writing. Ericsson should be careful not to over-rely on the US RAN gravy train, however, as that will run out of steam eventually and it had trouble recovering when the same thing happened in the 4G cycle. Getting Digital and Managed Services to contribute more to growth will be key.

Defiant Huawei reports 20% revenue growth

In spite of the growing geopolitical spat it has found itself in the centre of, Huawei reported $107 billion in total revenues for the 2018 financial year, up 20% year-on-year.

The consumer business unit is now clearly the most successful, though there is still minor momentum in the carrier business. This is the unit which has been suffering the most through the political scrutiny, though there have been some rays of sunshine.

Although the consumer business unit grew 45%, astronomical growth in an overarching sluggish segment, revenues in the carrier business declined by 1% year-on-year. This business unit has declined, but when you consider context, few will complain with these figures.

A 1% decline is still a decline, but Huawei has now collected 39 5G commercial contracts and shipped 50,000 5G base stations globally. In the month since Mobile World Congress, Huawei has collected an additional five contracts and shipped 10,000 base stations. Not a bad return for a business which has become the political punching bag of the world.

“Through heavy, consistent investment in 5G innovation, alongside large-scale commercial deployment, Huawei is committed to building the world’s best network connections,” said Guo Ping, Huawei’s Rotating Chairman (pictured).

“Throughout this process, Huawei will continue to strictly comply with all relevant standards to build secure, trustworthy, and high-quality products. As we work towards this goal, we have been explicitly clear: Cyber security and user privacy protection are at the absolute top of our agenda.”

Looking at the numbers, total revenues hit roughly $107 billion, year-on-year growth of 20%, while profits jumped 25% to $8.8 billion. This is a slight dip on the 27% growth from twelve months ago, but it is still a very strong performance. The consumer unit clawed in roughly $51.98 billion, the carrier business accounted for $43.80 billion and enterprise brought in the majority of the rest. A very small fourth business unit focusing on cloud is worth keeping an eye on, but today this is less than 1% of the group’s total revenues.

Taken in isolation, you wouldn’t think this is a company which is facing intense scrutiny and aggression from US politicians. The numbers tell a healthy story, but we all know there is a political storm brewing around the vendor.

This week has seen another hurdle thrown in front of the Huawei thundering train, with the Huawei Cyber Security Evaluation Centre (HCSEC) releasing a new report questioning the ability of the vendor to fix software mistakes. The HCSEC has stopped short of calling for a ban, however it is a damning opinion on Huawei’s security credentials.

As we understand it, Huawei was informed of the report 48 hours prior to its publication and while it will not necessarily be thrilled with the outcome, it will have to swallow the opinion. Huawei’s DNA is built in the hardware world therefore it is unsurprising the firm is suffering some complications in the software segments. However, Huawei is unlikely to be alone in with this challenge.

Huawei’s competitors are facing the same challenge having also evolved from the hardware businesses. All of these vendors are learning the ropes, adapting business culture and attempting to link up different acquisitions into a fluid, cohesive offering. Huawei is facing criticism, partly as it is a proxy for the Chinese government, though software is a difficult business which everyone is finding challenging.

Ultimately these numbers tell a story which we have suspected might been the case for a while. Huawei is not a company which will be killed off by the political climate, but it will not dominate the 5G era in the same way it championed the 4G.

Oracle reports flat growth as cloud segment booms

As a late-comer to the increasingly profitable cloud segment, Oracle has yet to make more than a minor dent, and this quarter appears to be another demonstration of mediocrity.

The company stopped reporting its cloud business revenues as a standalone during last year, so it is difficult to give a complete picture, though total revenues tell a part of the story. Total Revenues were $9.6 billion, down 1% year-on-year, though once constant currencies are applied the boost was 3%. Combined with a outlook which promises a range of 0% growth to negative 2% (1% to 3% growth in constant currency), its not necessarily the prettiest of pictures.

This is not to say Oracle is in a terrible position, the company is still profitable, and the growth prospects of the cloud segment encourage optimism, but it is not capturing the fortunes of its competitors.

Despite the heritage and continued influence of this business, perhaps we should not be surprised Oracle is not tearing up trees today. Back in 2008, CTO and founder Larry Ellison described the technology industry as the only segment “which is more fashion driven than women’s fashion”, suggesting cloud was nothing more than a passing fad.

Hindsight is always 20/20, but after this condemning statement about the embryonic cloud industry you can see why Oracle is reporting average numbers while others are hoovering up the cloud cash. Despite this late start, in 2016 Oracle felt it had caught up, with Ellison declaring “Amazon’s lead is over” during an earnings call.

While executives can make all the claims they like, reeling off various customer wins and pointing towards heritage in the technology industry, the numbers speak for themselves. Oracle is not profiting from the cloud bonanza in the same way competitors are.

Alongside the effectively flat revenue growth, Non-GAAP net income in Q3 was down 8% to $3.2 billion, while the merged cloud revenues and license support unit grew, it was only by roughly 1.1%. When you consider AWS, Google, IBM, Microsoft and Alibaba are all quoted numbers which are notably higher than this, it does paint a relatively gloomy picture.

Recent data from Synergy suggests revenues for 2018 passed the $250 billion across seven key cloud services and infrastructure market segments, operator and vendor revenues, representing a 32% increase year-on-year. Oracle will of course not be applicable for all of these segments however the overarching cloud trends are incredibly positive.

That said, perhaps the most damning piece of evidence is these numbers met analyst expectations. The team should be applauded for this fact however, it does suggest the analyst community no-longer consider Oracle a front-runner in the technology world. If the estimates are mediocre when the ingredients for success are so abundant, it doesn’t make for the most positive perception of one of yesteryears heavyweights.