Just a quick check-in from Shenzhen, China where the weather is a balmy 85 degrees and what feels like 120% humidity. I have endured 18 hours of flying [in coach] and the aforementioned soupy weather to attend Huawei’s Global Industry Analyst Summit. I was compelled to attend this conference given the colossal impact Huawei’s market presence has on the carrier equipment and services market and was eager to hear an update from their execs on corporate strategy and a review of 2007 results. What we saw and heard was clearly impressive…however, Huawei still has some growing up to do if it wants to crack into the top 3.

Huawei had a nice year in 2007, topline revenue growth was up 47% from 2006, leaping from 8.5B to ~12.5B USD. The numbers reported were “real” numbers, audited by KPMG, as opposed to the contract order results which are murkier to analyze but have been favored by Huawei in past dealings. Overall, growth was impressive across most LOBs although certainly at the expense of margins in most cases [operating margins were in the upper single digits]. Their strategy remains focused on taking marketshare with profitability an afterthought. While the Y/Y growth in the European and emerging market theaters was eye popping [triple digits], what was more impressive that they achieved all of that topline growth with less than 1% overall contribution from North America. Imagine if they took off here. I can, and they aren’t that far away from becoming viable. I’m working on a full write-up of my impressions which I will publish to Yankee Group clients in the next week or so.

The bottomline is that Huawei’s plan to dominate the world ultimately must include the United States, but today its not a high priority. They have made failed attempts to penetrate the U.S. in the past and their record on IPR here is lacking. That said, they have correctly assessed their present set of core competencies and concluded that they need vital experience in tier one operators undergoing massive transformation [i.e. BT, Vodafone] while bridging the glaring gap in services and support through developing end to end offerings and gaining experience in the lower tiers of the market. Huawei management has a clear understanding of where they are good [products/cost innovation] at and what needs work [prof services/support/branding/IT] and is determined to do what it takes to turn its weaknesses into strengths. This is certainly alarming news for reigning top 3 telecom infrastructure and service vendors but at least they can rest assured that NA will remain their exclusive playground for at least another 12 months.