Huawei Again Mulling IPO As It Hits Back Against Accusations Of Espionage

Huawei is considering an IPO after disclosing sales figures that may once again put it ahead of Ericsson AB in the race to become the world's biggest telecom equipment maker by revenue. Huawei CFO Cathy Meng said yesterday her company is open to a listing (link via Google Translate) after disclosing details of its 2012 performance.

Huawei's sales last year rose 8 percent year-on-year to 220 billion yuan ($35.4 billion), boosting net income 33 percent to 15.4 billion yuan, said Meng. In comparison, Ericsson, which will report earnings at the end of this month, is expected by analysts to post 2012 sales of 226.9 billion Swedish kroner ($34.8 billion), about the same as its 2011 results. Huawei first beat Ericsson in July 2012, when the Chinese company reported that its first-half revenue was $16.1 billion, or $850 million more than Ericsson's first-half sales.

Meng said that she disclosed the figures as part of ongoing efforts to "honor our commitment to transparency." She also expressed frustrations with U.S. investigations into Huawei's alleged connections to Chinese espionage: "These measures using trade protectionism to interfere with free competition will ultimately harm the benefits of end users and consumers."

The Chinese company has been considering an IPO for years, but progress has been stymied by the company's complicated share structure, as well as concerns that a listing would not allay U.S. lawmakers' suspicions that the Huawei is involved in espionage. As an alternative, analysts have speculated that Huawei might look at an IPO in Hong Kong or London instead. Last October, reports that Huawei had asked investment banks for advice on an IPO came at the end of a 18-month-long investigation by U.S. lawmakers into whether or not Huawei had engaged in espionage for the Chinese government. The Wall Street Journal reported at the time that Huawei saw the IPO as a way to win contracts in the U.S. and other lucrative markets by becoming more transparent.

In the meantime, Huawei has focused on boosting its presence in emerging economies and raising sales in Europe. Meng said that R&D spending last year rose 26 percent to 29.9 billion yuan ($4.7 billion), and that Europe, the Middle East and Africa made up 35 percent of its sales, while 17 percent were in other Asia-Pacific markets and 15 percent from the Americas.

The company has been repeatedly criticized for its opacity, as well founder Ren Zheng-fei's alleged ties with the Chinese army. Ren once worked as a military technology, a fact that has been cited by U.S. lawmakers when raising concerns that Huawei might be involved in cyber espionage.

Back in October, however, a White House review reportedly found no evidence of spying by Huawei, though it did note vulnerabilities in equipment that could potentially be exploited by hackers (though it was unclear whether or not they had been placed there deliberately). Around the same time, the U.S. House intelligence committee concluded that Huawei and ZTE both pose security risks to the U.S. government because their equipment could be used for espionage, in part because both Chinese companies would be required to comply with requests for access to their systems by the Chinese government.