Huawei Technologies has brought on telecom industry veteran Matt Bross as its chief technology officer, a position that up until now he’d held at British Telecom (s bt). With this move, it’s even more clear that Huawei wants to shed its image as an upstart Chinese maker of cheap telecom equipment rip-offs. And that’s not good news for Western equipment suppliers — everyone from Alcatel-Lucent (s ALU) to Ciena Corp. (s CIEN) should be worried.
I’ve been following the rise of Huawei (and ZTE Corp.) for some time. It used its Chinese government connections to build a sizable business in its local market, which it then leveraged in order to scale up in emerging telecom markets. The company that started out selling cheap DSL gear is now a major supplier of everything from routers to fiber systems. It’s also become a significant player in the wireless industry, where it’s been making big bets on LTE and WiMAX technologies.
In fact, Huawei is the world’s third-largest mobile equipment supplier, according to research from Dell’Oro, with 17 percent of the market. And much in the same way the success of Japanese car makers came at the expense of U.S. car companies, Huawei, which took in roughly $18.3 billion in sales in its most recent fiscal year, is causing problems for equipment makers in the west. (From the archives: The New Telecom World Order.)
Its hiring of Bross shows just how grand its ambitions are, especially in the U.S. market. The Dallas Business Journal reports that Huawei plans to double the number of its U.S. employees over the next 12 months, to 1,100. According to Stacey’s sources, many are defecting from the likes of Nortel (s nt) and Cisco (s csco), among other companies. But while Huawei’s current U.S. presence is miniscule, it has room to grow. As the Dallas Business Journal notes:
Huawei opened its North American operation in 2001, and the company has gradually started to win acceptance on this side of the globe. The company, which maintains that three-quarters of its $18.3 billion in 2008 revenue came from outside China, has won contracts with the likes of Richardson-based MetroPCS and the Atlanta cable company Cox Communications Inc., along with Bell Canada. Huawei declined to report North American sales figures, but revenue for the privately held company totaled $18.3 billion. It closed contracts worth $23.3 billion during that time. Using that ratio, the $250 million in new North American contracts last year would translate to $196.75 million in 2008 revenue from North American operations.
Huawei has been spending money on R&D like crazy, and in 2008 filed 1,737 patents, revealing its true intentions — that of becoming the most important equipment player in the telecom business. And now it’s hired a high-profile foreigner to help it reach that goal.
Bross, whom I’ve met on a number of occasions, is an interesting guy. During the last bubble he worked at Williams Communications, which landed him in the pages of my book, “Broadbandits: Inside the $750 Billion Telecom Heist.” The last time I saw him was when I visited British Telecom in London while working on a story about the company for Business 2.0. Bross was working on BT’s 21st CN, a next-generation broadband network that would transition everything at BT to an all-IP infrastructure. Huawei, incidentally, has in the past been one of BT’s major suppliers.
I’m not surprised that Bross is leaving the telecom giant. He was recruited by Ben Verwaayen in a New Jersey cafe in 2002 after Verwaayen drew his vision of BT on a napkin. Verwaayen left BT last year and now runs Alcatel-Lucent (s alu), the company most likely to be put to pasture if Huawei continues its forward march.