Tuesday, April 18, 2017

Huawei's Target of $150bn revenue by 2020 - Part 2

2016 financial results (continued)

Breakdown of Huawei 2016 and 2015 revenue by business group (RMB/$ millions), with RMB growth rate and share of corporate sales:



2016 2016 $  2015 Growth %  % of total
Carrier Business  290,561 41,841 235,113 23.60% 55.70%
Enterprise  40,666 5,856 27,610 47.30% 7.83%
Consumer  179,808 25,892 125,914 43.60% 34.47%
Other  10,439 1,518 7,092 48.60% 2.00%
Total  521,574 75,107 395,009 32.00% 100.00%

Commentary

It is worth noting that while the two numbers may not be exactly comparable Huawei's $41.8 billion for its Carrier Business in 2016 is about 60% larger than Ericsson's $26 billion for the same period. If Ericsson shrinks a further 6% in 2017 and Huawei grows by 17% Huawei will end up in nine months time about twice the size of its nearest competitor, and this scenario is not too unlikely.

Ericsson is now going through the kind of heavy restructuring from which companies almost never recover (since, to frame a medical analogy, surgery, or cost cutting, applied under panic conditions can often result in as much serious damage to healthy tissue as to those parts that are its main target). It is certainly a remarkable transformation in a relationship which only a couple of years ago was that of two strong but equal peers.

It should also cause some concern at U.S. majors such as AT&T and Verizon (forced by pressures from various sources in the U.S., including some elements of the security services, from doing any business with Huawei), who may see the possibility in a projected future scenario that they could start to fall behind technically and commercially because they were not allowed to do business with the world's largest communications equipment producer.

Looking at Huawei's Enterprise Business it also becomes clear why Cisco, despite its heavy year on year investment in reputedly market-leading fast growing acquisitions, is having difficulty even maintaining zero growth. The Huawei business was only founded a few years ago and is already one of the largest companies in its field globally, adding over $2 billion of new business every year. Whilst possibly half of Huawei's $2 billion annual addition may well come from new opportunities it has created through technology development and custom engineering the other $1 billion is probably being filched from existing business at traditional competitors, of which Cisco is the largest.

This level of competition is likely to accelerate. In September 2014 Eric Xu, Huawei's acting chief executive, told The Wall Street Journal in an interview that Huawei was aiming by 2019 to build a $10 billion sales level for its information-technology infrastructure business, consisting mainly of computer servers, storage and data centre management; two years later in September 2016 rotating CEO Guo Ping confirmed that Huawei was dedicating $1 billion annually, or about 10% of its R&D budget, to that particular initiative.

Breakdown of 2016 and 2015 revenue by gross geographical region (RMB/$ millions), with RMB growth rate and share of corporate sales:



2016 RMB  2016 $  2015 RMB  Growth %  % of total
China  236,512 34,057 167,690 41.00% 45.35%
EMEA  156,509 22,537 127,719 22.50% 30.01%
Asia Pacific  67,500 9,721 49,403 36.60% 12.94%
Americas  44,082 6,348 38,910 13.30% 8.45%
Other  16,971 2,444 11,287 50.40% 3.25%
Total  521,574 75,107 395,009 32.00% 100.00%

Commentary

A geographical breakdown of revenue by companies are often the least useful sets of information because they are so broad and include very often such a disparate set of economies. In EMEA, for instance, is it useful to include Saudi Arabia with Zimbabwe or the Central Africa Republic, or within the Americas Haiti with Canada? However, some relevant observations can be made on the above. The first and most obvious one is that contrary to the idea of Huawei diversifying rapidly across the globe and away from its home market, in practice in 2016 Huawei's Chinese business grew considerably faster than its business in the rest of the world. More specifically, Huawei's business outside China grew at around 25.4% from RMB 227,319 in 2015 to RMB 285,062, not much above half the 41% growth in China. However, this is more consistent with at least part of reality than one might think.

China's growth in GDP in 2016 according to the IMF was 6.6%, compared to global growth of 3.1%, and is currently predicated to grow at 6.5% in 2017 and 6.0% in 2018. Obviously that ratio of 2 to 1 between China and the world as a whole is even better comparing China with the rest of the world. So that 41% compared to 25.4% starts to look quite logical. Also, Huawei is spending a great deal of money on R&D and it is obviously fairly practical for the company to test this innovation at various levels in its home market first. However, the counterargument is that looking at the ratio of Huawei's business to GDP for the various geographies for which it provides revenue data those ratios vary dramatically.

Roughly speaking, the global nominal GDP of just over $75 billion is split as far as the Huawei regions are concerned $11 billion for China, $25 billion for EMEA, $27 billion for the Americas, and $12 billion for Asia Pacific, plus other. Therefore Huawei does about five times as much business in China compared to China's GDP as it does compared to the rest of the world, and in particular for the Americas the disparity in the ratios is in the region of 15 to 1. That probably means both that Huawei has an excessive share of its home market and could be at risk as other Chinese companies develop an interest, often through partnerships with western companies, and also that Huawei is still very underrepresented outside China.

Ekinops and OneAccess Plan Merger

Ekinops based in Lannion, France, a global supplier of next-generation optical networking equipment, and the major shareholders of OneAccess, a provider of network access solutions, announced that they have entered into exclusive discussions for a combination of their operations, with the proposed transaction to involve the acquisition of OneAccess by Ekinops.

The combination of the two companies would create a major player in transport solutions, Ethernet services and business routing sectors with combined annul revenue of over Euro 76 million (based on data for 2016).

As an initial step, Ekinops and OneAccess will consult with their employee representative organisations, with a view to finalising negotiations once the opinions of those organisations have been received.

Under the terms of the proposed acquisition, OneAccess' enterprise value is estimated at Euro 60 million, or approximately 1x revenue, representing an equity value of Euro 58 million. Ekinops plans to fund acquisition through a combination of cash and shares, as a part of which it would implement a capital increase for the equivalent of approximately 50% of OneAccess' equity capital, with this transaction subject to approval by its shareholders.

Subject to shareholder approval, on completion of capital increase transaction, OneAccess' shareholders would contribute all of their shares in exchange for 50% of the value in cash and 50% in Ekinops shares. The new Ekinops shares would be priced at the average share price, weighted by volume, of Ekinops shares on Euronext between 30 March and 15 April 2017, but within the range Euro 7.25 and Euro 8.21. On completion of the transaction, OneAccess shareholders would own 20%-25% of the new company.
In addition, an earn-out payment based on revenue generated of not more than Euro 6 million would be paid to OneAccess shareholders for the 2017 and 2018 fiscal years.

France-based OneAccess, founded in 2001 and with around 350 staff, is a supplier of software and hardware platforms to telecom carriers and service providers serving large corporate and SME customers. The company claims nearly 130 telecom carriers as clients, including 29 in the global Top 100, and has four R&D centres, located in Velizy and Sophia Antipolis, France, Louvain, Belgium and Bangalore, India. In 2016, OneAccess generated revenue of Euro 58 million and EBITDA margin of 9.1%.

Through combining their operations, Ekinops and OneAccess would establish a major global supplier of optical transport and telecom network virtualisation solutions. The new company would have a total workforce of over 400 employees and combined revenue of Euro 76 million, with around 55% sales generated outside of France.

The transaction is currently expected to be completed during the summer of 2017.

Huawei launches 8-slot compact backbone router for NE9000 Series platform

Huawei announced the release of the eight-slot NE9000-8, the latest product in its series of backbone routers and based on the same platform as the previously released, larger capacity 20-slot NE9000 solution.

Huawei's new NE9000-8 platform provides high forwarding capacity together with a range of service features and is designed to serve as an interconnect node for small or medium-sized data centre or metro core nodes. The NE9000 series products are designed to address carrier requirements for backbone network service development and help to prepare carrier networks for the transition to the cloud.

The NE9000-8 backbone router offers high capacity and integration and, via eight service slots, enables support for what is claimed to be the first 4 Tbit/s routing line card, delivering total capacity of up to 32 Tbit/s. The solution also enables an evolution to 8 Tbit/s per slot to support the future service requirements of interconnect nodes for small/medium-sized data centres and metro core nodes.

Delivered in half the height of a 2.2-metre standard cabinet, the NE9000-8 offers a more compact and cost-effective solution while providing the same capacity and consuming half the power compared with similar products.

Huawei noted that leveraging operating system virtualisation, a single NE9000 platform can be virtualised to provide multiple logical devices, allowing control, management and physical resource isolation for services. This capability allows converged bearing of multiple services, thereby helping to reduce the number of network nodes required, as well as lowering network costs.


The NE9000 is a key element of Huawei's CloudBackbone solution, which is designed to help carriers adjust network configurations and enhance overall network efficiency utilising real-time monitoring of network traffic and centralised control and management.

ZTE reports Q1 revenue of RMB 25.74b, up 17.8% YoY

ZTE has announced financial results for the first quarter ended March 31, 2017, as follows:

1. Operating revenue for the first quarter of RMB 25.74 billion (approximately $3.74 billion), up 17.8% compared with RMB 21.86 billion in first quarter of 2016.

2. Operating profit for the first quarter of RMB 764.1 million, up 143.2% compared with RMB 314.2 million in first quarter of 2016.

3. R&D expenditure for the first quarter of RMB 3.33 billion, up 9.2% versus RMB 3.05 billion in first quarter of 2016.

4.  SG&A expenditure for the first quarter of RMB 3.47 billion, up 4.2% compared with RMB 3.33 billion in first quarter of 2016.

5.  Profit attributable to shareholders of RMB 1.21 billion (approximately $175.7 million), up 27.5% compared with profit of RMB 949.5 million in first quarter of 2016.

6.  Cash as of March 31, 2017 RMB 29.25 billion, versus RMB 32.35 billion as at December 31, 2016.

Additional results and notes

ZTE reported negative net cash flows from operating activities for the first quarter of 2017 of RMB 971.2 million, compared with positive net cash flow from operation of RMB 3.94 billion in the first quarter of 2016.

The company noted that the higher first quarter profit derived from sales growth for carrier network solutions and smartphones. More specifically, ZTE stated that in the first quarter it achieved over 25% growth in shipments of set-top-boxes as part of its Big Video business, while shipments of in-house developed chipsets rose 70% year on year during the quarter.

ZTE integrates Quantenna WiFi chipset with GPON residential gateway

ZTE and Quantenna Communications, a provider of high performance WiFi solutions, announced the development of a new high-end GPON product that integrates Quantenna's advanced 4 x 4 802.11ac Wave 2 QSR1000 chipset and targets the service provider market.

The new product from ZTE and Quantenna is designed to offer greater bandwidth to support full-service access and multi-scenario requirements, and also provides carrier-class QoS.

Quantenna's QSR1000 chipset, introduced in 2103, was claimed to be the first 802.11ac chipset with 4 x 4 MIMO technology, enabling gigabit throughput over WiFi and designed for access points in the home or office.

Earlier this year, Quantenna announced its latest 802.11ax product, the QSR5G-AX, offering support for dual-band, dual concurrent 4 x 4 + 4 x 4 operation. The product complements the QSR10G-AX dual-band, dual concurrent 8 x 8 + 4 x 4 802.11ax 12-stream access point solution announced in October 2016.

IDT and Epson Introduce Timing Solution

Integrated Device Technology (IDT) and Seiko Epson, a leading supplier of quartz crystal technology, have introduced an ultra-high performance timing solution designed to address phase noise challenges in telecommunication and data centre applications.

For the solution, IDT's new 8V19N474 jitter attenuator and frequency synthesiser is coupled with Epson's VG-4513 voltage-controlled crystal oscillator (VCXO) to provide leading phase noise performance for demanding applications such as 40/100/400 Gigabit Ethernet timing.

The new 8V19N474 jitter attenuator and frequency synthesiser features RMS phase noise of 75 femtoseconds, with the ultra-low performance designed to provide system designers with the clocking requirement to transition from 28 Gbit/s to Ethernet interfaces utilising 56 Gbit/s PAM4 (TX) PHYs and other high-performance SerDes applications with sufficient timing margin.

IDT's 8V19N474 device can generate up to 12 reference clock signals and outputs multiple synchronised clocks, together with an output frequency range from 25 to 2500 MHz, including 125 and 156.25 MHz and LVDS and LVPECL outputs with adjustable amplitudes. The device targets Ethernet and OTN (OTU3, OTU4) in complex applications, as well as for driving ADC/DAC converters, cable TV head-end and DOCSIS 3.1 applications.

For wired communications, the IDT solution enables compliance with physical layer specifications of phase noise, bit error rate and signal-to-noise ratio without the need for external filtering. Additionally, the product's integrated low drop out regulator enables cost savings through enabling the use of an inexpensive DC/DC voltage supply.

Epson's VG-4513 VCXO device constitutes a proven component in the joint solution. Employing an HFF (high-frequency fundamental) crystal, the VG-4513 VCXO delivers very low close-in phase noise which, combined with the integrated VCO within IDT's 8V19N474, enables low phase noise at higher offset frequencies.


IDT's 8V19N474 product, which is available immediately, is supplied in an 8 x 8 mm 81-CABGA package; the Epson VG-4513 is also available now, provided in a 7 x 5 x 1.6 mm or a 5 x 3.2 x 1.3 mm ceramic package.

Cloudways Launches Auto-scalable Cloud Hosting on Bare-metal containers

Cloudways based in Malta, a provider of managed Container-as-a-Service for web apps, has unveiled managed, auto-scalable cloud hosting on Kyup bare-metal containers designed to scale up and down without human intervention and with virtually no downtime.

The company noted that auto-scalability is a key requirement for web app deployment, and websites deployed on managed Kyup containers from Cloudways able to provide auto-scaling in response to fluctuating traffic volumes. As a website registers high traffic levels, the server (RAM and CPU) scales to prevent downtime, before reverting to normal when traffic declines to allow improved resource utilisation.

Leveraging Cloudways Cloud Platform, users can quickly launch Kyup containers, while developers can select from a range of provided installers to create web apps. Users can also launch a simple PHP stack for deploying custom PHP-based applications.

In addition, Cloudways ThunderStack, a formula developed based on the latest web-server and caching technologies, is claimed to enable apps to run up to 300% faster compared with other cloud platforms.

Cloudways also features the CloudwaysBot, a bot that generates notifications to website owners within the platform and via email, Slack, or HipChat when the server scales up and down. The bot can also provide users with server and app related insights.


Together with Kyup, Cloudways claims to offer the first managed Container-as-a-Service for web apps. With Cloudways, developers and designers can use managed, auto-scalable Kyup containers to efficiently deploy PHP-based apps. The platform features over 50 one-click features, including browser-based SSH, free SSL, Git and staging areas.

Monday, April 17, 2017

FCC Auction Draws $19.8B for 70MHz of Repurposed Spectrum

The FCC's broadcast incentive auction, which concluded last week, attracted bids totalling $19.8 billion (gross revenue) for 70MHz of spectrum for nationwide mobile use.  This is among the highest grossing auctions ever conducted by the FCC.  More than $10 billion of this total will go to 175 broadcasters whose previously licensed spectrum was selected for the incentive
auction. Remaining funds go to the U.S. Treasury.

A total of 50 winning bidders won 70 MHz of licensed spectrum nationwide. A total of 14 MHz of spectrum is available for unlicensed use and wireless microphones. On a nationwide basis, 70 MHz is the most mobile broadband ever auctioned below 1GHz by the FCC. Among the largest winners were T-Mobile, Dish, Comcast, and US Cellular.

The Commission now commences a 39-month transition period to move broadcast stations to new channel assignments.

FCC Chairman Ajit Pai said, “The conclusion of the world’s first incentive auction is a major milestone in the FCC’s long history as steward of the nation’s airwaves. Consumers are the real beneficiaries, as broadcasters invest new resources in programming and service, and additional wireless spectrum opens the way to greater competition and innovation in the mobile broadband marketplace.”

http://www.fcc.gov


Huawei's Target of $150bn Revenue by 2020 - Part 1

Preamble - Huawei little recognised or understood in western circles of power

Huawei is not very well-known in the U.S. for many historical and political reasons and yet it is already a major, and sometimes the leading, player in most geographical and sectoral electronics equipments markets outside of the U.S. Moreover, if it meets the targets it has set itself (and it has a very good record in that respect) it could be close to becoming the world's largest electronics company within the next five years. There are several reasons for this possibly rather dangerous state of ignorance or denial in the U.S. including the following.

Very low level of business in the U.S.

In its latest 2016 report published March 31st Huawei says that geographical sales last year for a region described as The Americas were just over RMB 44 billion, which is roughly $6.35 billion and only about 8% of its global total. Given that all the countries involved in the Americas, other than the U.S., i.e. Canada, Central America, South America and the Caribbean, contribute almost 14% of global GDP it is easy to see that the figure is quite low even for those countries and sales in the U.S. must indeed be very small, probably just a few hundreds of millions of dollars.


Preamble - Huawei little recognised or understood in western circles of power

Huawei is not very well-known in the U.S. for many historical and political reasons and yet it is already a major, and sometimes the leading, player in most geographical and sectoral electronics equipments markets outside of the U.S. Moreover, if it meets the targets it has set itself (and it has a very good record in that respect) it could be close to becoming the world's largest electronics company within the next five years. There are several reasons for this possibly rather dangerous state of ignorance or denial in the U.S. including the following.

Very low level of business in the U.S.

In its latest 2016 report published March 31st Huawei says that geographical sales last year for a region described as The Americas were just over RMB 44 billion, which is roughly $6.35 billion and only about 8% of its global total. Given that all the countries involved in the Americas, other than the U.S., i.e. Canada, Central America, South America and the Caribbean, contribute almost 14% of global GDP it is easy to see that the figure is quite low even for those countries and sales in the U.S. must indeed be very small, probably just a few hundreds of millions of dollars.

2016 financial results

Core numbers from the Huawei 2016 report (RMB millions) except first column in US$ millions:


2016 ($m)  2016 2015 2014 2013 2012
Revenue  75,103 521,574 395,009 288,197 239,025 220,198
Operating Profit  6,842 47,515 45,786 34,205 29,128 20,658
Net profit  5,335 37,052 36,910 27,866 21,003 15,624
Cash flow from ops  7,087 49,218 52,300 41,755 22,554 24,969
Cash/short term inv  20,973 145,653 125,208 106,036 81,944 71,649
Working capital  16,736 116,231 89,019 78,566 75,180 63,837
Total assets  63,880 443,634 372,155 309,733 244,091 223,348
Total borrowings  6,451 44,799 28,986 28,108 23,033 20,754
Owner's equity  20,178 140,133 119,069 99,985 86,266 75,024
Liability ratio  68.40% 68.40% 68.00% 67.70% 64.70% 66.40%

(NB: it is worth noting that while the Huawei 2016 accounting results use the standard practice of converting from local currency to dollars at the average rate on December 31, 2016 (defined as RMB 6.9448 to the dollar), the average monthly exchange rate for all of 2016 was actually about RMB 6.643 to the dollar and at that rate Huawei's sales for the year in dollars would have been $78.51 billion, only slightly behind IBM's revenue for the year of $79.9 billion.)

Intel Developer Forum 2017 is Cancelled

Intel has canceled its annual Intel Developer Forum, which was scheduled for August in San Francisco.

In comments to Anandtech, Intel said the event had simply grown too large especially given its move into autonomous driving and artificial intelligence.

IDF has been held annually since 1997.  A spring IDF 2017 in China was also canceled.

http://www.intel.com/content/www/us/en/intel-developer-forum-idf/san-francisco/2017/idf-2017-san-francisco.html