Huawei Posts Solid Growth but Warns of Difficulties Ahead

https://www.nytimes.com/2019/12/30/business/huawei-revenue-growth.html

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HONG KONG — For Huawei, it has been a year of lawsuits, blacklists, diplomatic fights, spying accusations and, most recently, viral anger from the Chinese internet.

Through it all, the company posted solid growth, its deputy chairman Eric Xu said on Tuesday. In a year-end note, Mr. Xu said the company’s sales in 2019 increased an estimated 18 percent from a year earlier to $121.8 billion, just below the company’s initial target for revenue.

The results hinted at a slowdown in the final quarter of the year, and Mr. Xu’s note was rich in metaphors describing the difficult days ahead. Alternately likening the company to plums bitten by winter’s frost, a bamboo stalk battered by wind and an embattled aircraft, the executive said that in 2020, the company would not grow as rapidly as it did in the first half of 2019.

“It’s going to be a difficult year for us,” wrote Mr. Xu, adding that “the external environment is becoming more complicated than ever, and downward pressure on the global economy has intensified.”

Huawei is the world’s leading maker of equipment that powers cellphone networks and a champion of Beijing’s ambitions to build new, cutting-edge technology companies. Officials in the United States have long been worried that China’s government could use Huawei’s products to gather intelligence, an accusation the company has repeatedly denied.

Huawei’s year went from bad to worse when the United States added the company to an export blacklist in May. The move effectively restricted its ability to purchase American products crucial to its smartphones and telecom gear, weighing on revenue growth.

The blocks, though, have proven somewhat porous. The Trump administration has permitted sales to Huawei that are used to maintain existing mobile networks. Some of its American suppliers determined they could lawfully continue selling nonsensitive products to the company. In October, the Trump administration said it would issue export licenses to certain United States companies selling to Huawei, further easing pressures on its supply chain.

Even so, Mr. Xu indicated that the confrontation with the United States would continue to dampen growth and said he expected Huawei to remain on the blacklist in 2020.

“Difficulty is the prelude to greater success, and adversity the whetstone of an iron-willed team. The U.S. government’s campaign against Huawei is strategic and long-term,” he wrote.

Huawei, he said, will “need to go all out” to develop software and services that work with its smartphones. Analysts have worried about whether the company’s smartphones would remain competitive since it was blocked from working with Google. Huawei had to release its latest flagship smartphone, the Mate 30 series, without regular access to Google’s apps.

Mr. Xu said the company shipped a total of 240 million smartphones in 2019, an increase of almost 17 percent over the 206 million units it sold in 2018.

The company’s shares are not publicly traded and it has no obligation to announce its results. In a nod to transparency, Huawei has long announced financials, and this year it began reporting unaudited results quarterly. The numbers for 2019 are not audited, and the company will likely provide further details for its performance in the first months of 2020.

With Huawei’s business under pressure, Mr. Xu also warned of tough times for employees, even as he thanked them. Huawei unexpectedly became the center of online anger in China this month after an employee said he had been jailed for 251 days after demanding severance pay from the company. The experience struck a chord for many Chinese white-collar tech employees, who are now facing sagging returns for long hours at the office.

Despite the renewed focus on Huawei’s famous hard-charging corporate spirit, Mr. Xu did not mince his metaphors in describing the company’s outlook on its employees.

“Managers at all levels need to put company interests above personal gain and go where they are needed most, including hardship regions,” he wrote, calling those willing to put up with such difficulties “tree growers.”

He said the company would remove managers who were performing in the bottom 10 percent as part of a plan to better prune talent.

“We will remove mediocre managers more quickly — people who have lost their enterprising spirit, who have built their position on personal connections or empty and unactionable reporting, and those who prioritize short-term gains and pass problems on to their successors,” he wrote, calling such people “the pit-diggers among us.”