Huawei Considers IPO, Counters Accusations of Cyber Espionage

Huawei Technologies Co. Ltd. considers an initial public offering (IPO) after releasing its sales figures that may edge out Sweden-based Ericsson as the biggest telecom equipment manufacturer in terms of revenue.

The China-based company is expecting its 2012 sales figure to go up to eight percent year-on-year and eventually hit $35.4 billion. On the other hand, analysts predict Ericsson’s 2012 sales posting to be at $34.8 billion, which is about the same figure as reported by Ericsson in 2011. The first time the Chinese company outdid Ericsson was in July 2012, when Huawei reported a $16.1 billion first-half revenue – a figure that’s $850 million in excess of Ericsson’s first-half earnings.

Cathy Meng, chief financial officer at Huawei, said (according to a Google Translate transcript) that the company is launching an IPO after divulging the specifics of its 2012 sales performance in a display of transparency and in an effort to dispel security concerns.

Huawei’s CFO Meng expressed her frustrations regarding the U.S. inquiry into her company’s alleged ties to cyber espionage. “These measures using trade protectionism to interfere with free competition will ultimately harm the benefits of end users and consumers,” she remarked. “As we continue to invest in this industry and work with our customers, our customers and markets generally see the value we create for them.”

For years, Huawei has been mulling an IPO. However, making steps toward a listing was confounded because of the Chinese company’s complex share model. Plus, there were apprehensions about a listing not being able to take the edge off the espionage-related suspicions of U.S. lawmakers.

Huawei has been criticized multiple times for its lack of transparency, as well as the suspected ties of Ren Zheng-fei, Huawei’s founder, to the Chinese army. Ren Zheng-fei was once a military technology officer of the People’s Liberation Army.

Huawei might list its stock in either Hong Kong or London, according to speculations by analysts. In October 2012, when a review by the White House discovered no signs of spying, reports circulated about Huawei seeking IPO advice from investment banks. The same White House review documented equipment vulnerabilities that could be targeted by hackers, but it was not clear if those vulnerabilities had been deliberately introduced.

Meanwhile, around the same time the White House review came out, the intelligence committee of the U.S. House concluded that both Huawei and ZTE Corp. posed security risks. The equipment from the two companies could be exploited for espionage. Also, Huawei and ZTE would be forced to grant access to their technologies by the Chinese government.

For the time being, Huawei Technologies Co. Ltd. has directed its efforts at boosting the company’s presence in emerging economies and increasing its European sales. Meng said that Huawei’s expenditure on last year’s R&D went up by 26 percent to $4.7 billion. Thirty-five percent of its sales were composed of Africa, Europe, and the Middle East, while 17 percent were in Asia-Pacific markets. Sales to the Americas were 15 percent. (KOM) Link. Link.