Huawei bets on the cloud, mobile phone sales soar

BEIJING/HONG KONG Wed Aug 3, 2011 6:49am EDT

BEIJING/HONG KONG (Reuters) - China's Huawei Technologies Co Ltd, the world's No. 2 network equipment maker, launched its cloud computing smartphones on Wednesday, looking to ride a mobile industry boom that drove a 64 percent sales rise in its devices unit in the first half.

The company, known for its low-cost cellphones, is betting its new model will help it replicate its telecom gear success in the booming smartphone market and take on the likes of Nokia, Apple Inc and Samsung Electronics.

Huawei's Cloud+ platform will allow users to store music, video, pictures, email and some other applications on its remote servers and access them via the Internet through their smartphones.

"We are targeting at what we call the young social networkers for this smartphone," Victor Xu, chief strategy and marketing officer for Huawei Device, told reporters in Beijing at the launch of its "Vision" smartphones.

Huawei is targeting 2011 shipments of more than one million units of the smartphone, which comes with the blockbuster Angry Birds game pre-installed.

Company executives declined to provide any details of the pricing but said that the smartphone would not sell for less than 2,000 yuan ($305). Apple's iPhone 4 sells for 4,999 yuan or $762 in China.

Cloud computing smartphones will allow users to download applications without needing much storage space on their devices.

Huawei follows Apple in pushing ahead the fast-growing new consumer market after the U.S. company unveiled its Web-based iCloud service in June.

Founded in 1987, Huawei has grown rapidly. The company, which employs more than 110,000 people, reported revenue of $28 billion last year and aims to boost revenue to $100 billion in the next 10 years.

It has been selling its cellphones in markets from Australia to Kenya, but China, home to more than 900 million mobile phone subscribers, is emerging as the goldmine for global companies.

Last month, Apple said the maker of the iPhone and iPad was merely "scratching the surface" in China. Apple is set to exponentially grow its China business as the country's biggest telecom operators jostle to stitch up deals to sell iPhones.

China's Alibaba Group has launched its first self-developed mobile operating system and smartphone running on its cloud computing-based operating system.

Huawei's new 9.9-mm, 121-g phone runs on Google's Android 2.3 operating system and Qualcomm's Snapdragon chip.

Cloud based services are gaining momentum, but many experts have warned companies against putting too much faith in these services due concerns about security and privacy of data.

This year, Sony Corp was battered by a data breach that compromised the personal data of more than 100 million customers of the Japanese electronics conglomerate.

On Wednesday, security experts discovered the biggest series of cyber attacks to date, involving the infiltration of the networks of 72 organizations including the United Nations, governments and companies around the world.

Huawei's U.S. expansion plans in the network equipment sector have hit roadblocks on suspicions the company maintains links with China's military.

Ren Zhengfei, Huawei's low-profile founder who started the company with just 21,000 yuan ($3,200), served in the People's Liberation Army until 1983.

The company has repeatedly denied any links with China's military or government.

RAPID GROWTH

Global sales from Huawei's devices division, which sells consumer products such as smartphones, mobile phones, tablets and wireless cards, grew 64 percent to $4.2 billion in the first half of the year from a year ago, it said in a statement.

Shipments jumped nearly 40 percent to 72 million units, privately-held Huawei said in a statement. Cellphones form the majority of its shipments.

Shenzhen-based Huawei and Chinese rival ZTE Corp, which have traditionally concentrated on the network equipment business, are aggressively muscling in on mobile devices.

"Cellphones have been a cash cow for Huawei over the past few years, but I don't think it can replace its main business in network equipment," said Jane Wang, a Beijing-based analyst at UK research firm Ovum.

"In a way, we saw cellphones as a key compliment to its business because it allows then to work more closely with telecom operators."

Smartphones still account for a fraction of China's mobile phone market.

"We are striving to become one of the top three global brands for mobile phones by 2015," Huawei Device CEO Wan Biao said in the statement. The unit contributed about 17 percent to total revenue.

In July, Huawei Device executives said the firm aimed to ship 20 million smartphones this year, higher than a previous target of 12 million-15 million units.

In June, Huawei unveiled its MediaPad, a 7-inch Android-based tablet computer in Singapore, and is also developing a 10-inch device to be launched this year.

(Writing by Anshuman Daga)

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