Huawei shows China's scope for organic growth

Wed Jan 20, 2010 6:58am EST
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By Doug Young

HONG KONG (Reuters) - Its history is peppered with cloak-and-dagger stories which fostered a reputation for winning technology by hook or by crook. But today Huawei Technologies' disciplined growth strategy is a beacon to many emerging markets firms.

China computer leader Lenovo's 0992.HK fraught purchase of IBM's PC business four years ago has become a symbol of the clumsier aspects of China's attempts at overseas expansion. But the telecoms group founded in 1987 by a former Chinese military researcher to sell pre-digital telecoms switches to Hong Kong has built its business patiently, even, at times, stealthily.

Huawei has arguably become China's most successful company on the global stage. The Shenzhen-based firm has achieved international success that other major Chinese corporations, such as Haier in consumer electronics, Geely in autos and ICBC in banking, can only dream of.

Today global communications network operators from Dubai to Nigeria to Latin America look beyond the tales of military ties and corporate espionage to do big business with Huawei. Business partners include Vodafone, Deutsche Telekom and security software leader Symantec Corp, which runs a joint venture with the company.

In its biggest success to date, the company recently beat out a top global rival, Ericsson ERICb.ST, in its own backyard: in December, 2009, Huawei won deals to build next-generation networks for major mobile carriers in Norway and Sweden.

Such operational gains propelled the firm from obscurity to the world's No. 2 telecoms equipment maker last year, surpassing the likes of Alcatel Lucent ALUA.PA and Nokia Siemens Networks NOKI.UL to rank behind only Ericsson.

Both Huawei and ZTE Corp 0763.HK, whose main focus is on emerging markets, have had an organic growth strategy, shunning acquisitions in favor of a build-it-themselves approach.

Product development has been a cornerstone of the company since its founding by Ren Zhengfei, a media-shy former engineer with the People's Liberation Army, who struck out on his own.   Continued...