Video conferencing - Huawei & ZTE to enter the market

Source: Ovum

As per below text, Huawei & ZTE will be entering the market. In this part of the world the video conferencing or tele presence yet to take in a big way. Perhaps due to the geographical distance or the cultural reasons we don't see many people going for video conferences. Does Huawei/ZTE entrance in to the market will change this scenario? I don't think so. The impact in APAC would be minimum as Asians tend to prefer face-to-face meetings and build rapport over lunch/dinner rather than business meetings. Also the investment and mtce is not cheap. If we really want to reduce the costs down then there are options like Skype or SIP based video conference solutions.



    HELSINKI, May 5 (Reuters) - Video conferencing services developed by Huawei and ZTE will shake up the market in coming years in the same way the Chinese vendors changed the telecom gear sector, research firm Ovum said on Thursday.
Ovum forecast that business spending on video conferencing would grow annually by 6 percent through 2016 when the global market would be worth $3.8 billion.
The video conferencing equipment market is dominated by established U.S. vendors Cisco <CSCO.O> and Polycom <PLCM.O>, but Ovum said Huawei Technologies [HWT.UL] and ZTE <000063.SZ>, both small players now, are set to have a major impact on the market in the next two to four years.
"We expect them to cause quite a lot of disruption," Ovum analyst Richard Thurston said.
Huawei and ZTE together have built up a 30-percent share of the global mobile telecom gear market in a few years through aggressive pricing that pushed vendors such as Nortel and Motorola out of the business.
Ovum said some parts of the videoconferencing market were set for much higher growth: 19 percent annually for high-end offerings such as telepresence rooms costing about $300,000 each and 11.5 percent for managed services.

Huawei Revenue increases 30% in 2010

Source: Huawei Annual Report

Key Points

• Revenue increased by 30%. Now stands at RMB 185 billion vs RMB 149 billion in 2009 (5 years back it was RMB 66 billion in 2006)
• Revenue from overseas is RMB 120.4 billion
• Net profit is RMB 23.75 billion (5 years back it was RMB 3.99 billion in 2006)
• Operating Margin ~ 15%. 

Look at the image right to see CAGR.

Operating margin is pretty healthy compared to the competetors in Mobile market. Ericsson gross margin is ~ 8% in 2009 and Nokia margin is ~ 34% but this is entire nokia. Not simply the infra business.

However this is pretty low compared to networking giants like Cisco. Cisco share price dropped in Feb because their margins missed the target (~62.4% vs analyst 63.3%).

I believe their strategy would be to focus on services now. They've presence over 140 countries and with cheap hardware/free upgrade strategy they've managed to get in to lot of networks. Now this is the right time for them to start 'milking'.

Huawei - One more probe (Telekom Austria Probes Huawei Deals)

Source: Light Reading

+1.. Seems more and more scandals in telecom market.. If they look in to developing world, the scandals would increase by dozens..

Telekom Austria AG says it has launched an internal investigation into allegations of corrupt business practices that resulted in the award of contracts to Huawei Technologies Co. Ltd.

The European operator says it "would like to distance itself fiercely from such alleged business practices, which fell under the responsibility of the former management," and says it has "launched internal investigations into these allegations in order to examine those and to get the facts out on the table."

It added: "In the event that these allegations prove to be true, the Telekom Austria Group will take appropriate action against the supplier Huawei and any further persons or companies involved."

Huawei Strategy

Source: Caing.com

I've posted briefly on Huawei on their open letter to US & VHA decision. According to the post, a Huawei executive mentioned that they need to change their strategy and I fully agree with them.

"A product- or technology-centered approach to corporate strategy is correct in an era of insufficient supply,"  "But in an era of excess supply, (strategy) needs to have customer demand at its center."


Also, Huawei successfully transformed the mobile & telco industry. There was a day, when the vendors demand hefty prices for the equipment, software price, license charges & maintenance charges. I remember a classic example where we started negotiation with an European vendor for UAT Charges. After Huawei entered in to the market, the situation became more and more competitive and they effectively commoditized the hardware market.

Some key points from the report.

* Huawei plans to work with major customers to jointly develop "customer innovation centers," assigning staff members with expertise in various product lines and technical factors to work directly on-site with customers and so far they've setup in Vodafone, Telefonica & China Mobile.

* Increased focus on terminal. Revenues of the division grew 24 percent from 2009 to US$ 4.5 billion last year, and now comprise 16 percent of the company revenues.

* Cloud computing is another arena and they want to be in the top 3 players. And at a press conference, Huawei CEO Ren Zhengfei said his company's cloud platforms would "catch up with and surpass Cisco's in not too long a time."

Though I believe in Huawei abilities, my concern will be on their execution & their image.

Their biggest problem is execution and typically in communication & process. Most of the times either the communication breaks or mis-interpreted or totally missing. While the process seems to be very fluid and different project managers seems to follow different structures. This was evident in the mail from Telekom Malaysia CEO letter to Huawei Chairman in last year.

"Image" is another challenge for Huawei. They have to handle it and it's pretty sensitive...

Huawei open letter to United States (Gov + People)

Source: http://www.huawei.com/huawei_open_letter.do

This is in reply to the supposed gov blockage of 3Leaf acquisition. This is not the first time US block a deal because of potential security issues/concerns. In my opinion after the Huawei indicant in India there is a lot of disbelief and suspiciousness about the company operations and intentions. If huawei learned one or two things from Sun Tzu, they'd not be in this position :)

But moving forward, I see more and more governments try to scrutinize the Chinese companies deals and their operations which is not going to be a good thing for them. What they need to do is they need to build the credibility and trust. Today most of the deals with Chinese companies goes like "Yes deals". What ever the Customer requirement is the vendor answer will be "Yes". It may sound good but in reality this is not always good. They've changed their image from pure copy cat & cheap player to respectable technological firm, so for Huawei, it's the time they should learn from their counterparts..

Vodafone Hutchison Australia (VHA) replacing their RAN with Huawei

Source: telecoms.com

Interesting to see VHA replacing their RAN network. Also Optus is working with NSN & Huawei and if they choose NSN,  then it's became a testing ground for the three largest telecom vendors in australia (Telstra is with Ericsson). VHA didn't specify what was the root cause or actual case behind the dropped calls, delayed sms & voice mails, slow data speeds and long waits to customer care :) but I don't think the problem is completely with the radio network. It was working pretty well until middle of last year and during the second half the performance drop became pretty obvious.

Most of the carriers I've seen had the problems during the early days of HS launches. This is due to various reasons but main culprit is the optimization and configuration. So hopefully VHA managed to find the root cause and they are addressing it by replacing their RAN.

 By the way I am not a radio expert so the comments about radio are based on my conversation with radio experts rather than from my own experience.