Huawei Growth Cools, Says Raymond James; Still a Threat to AAPL, CSCO

Raymond James‘s Tavis McCourt today offered up his thoughts on the 2012 financial results released yesterday by privately held China smartphone and equipment maker Huawei, whose wares are increasingly seen as a threat to established smartphone makers such as Apple (AAPL), Nokia (NOK), and Research in Motion (RIMM), as well as Samsung Electronics (005930KS) and other companies using Google‘s (GOOG) Android software, and whose telecom equipment has long battled the offerings of vendors such as�Cisco Systems�(CSCO).

Huawei said its total sales last year were probably 220.2 billion Chinese Renminbi, roughly $35.4 billion, an 8% year-over-year increase, while profit probably rose to 15.4 billion Renminbi, up 33%. 65% of revenue came from outside China, the company said.

Huawei saw growth slow, and McCourt writes that even though results in sales of telecom equipment outshone rivals such as Cisco, it’s an indication that carrier demand is lower than previously, and that Huawei is focusing more on profit now than on revenue growth:

Its sales growth slowed, in its case, to 8% from 12% in 2011. Western competitors fared less well, and based on consensus expectations for 4Q12, Alcatel-Lucent�s (ALU) sales could decline 8%, Cisco�s grow 5%, while Ericsson�s (ERIC) and Nokia Siemens Networks� sales drop 2% in 2012. Market research firm Infonetics forecasts 3.6% carrier capex growth in 2012. ? Huawei�s Carrier Network unit sales grew 6.8% to $25.6 billion or nearly three-quarters of revenue. Huawei did not provide a detailed segment breakdown, but in 2011 a third of sales came from fixed networks, another third from wireless infrastructure, nearly a quarter from services and over 10% from software. Huawei will rank second in the carrier market behind Ericsson�s roughly $34 billion sales and ahead of expectations for Alcatel-Lucent at $18.8 billion, Nokia Siemens Networks at $17.8 billion, and Cisco�s service provider sales at $15.6 billion [...] In prior public statements, Huawei representatives have highlighted the company�s intention to derive growth from enterprise and consumer, implicitly suggesting that its expectations for carrier growth have moderated. Huawei�s Chief Executive recently stated that the company will shift focus in 2013 from rapid growth to profitability, which could pressure its suppliers. Huawei remains a primary competitive threat for carrier-focused suppliers such as Alcatel-Lucent and Ericsson, but the environment has stabilized. In the enterprise market, Cisco maintains a significant lead, as does Apple in the consumer marketplace. Both Cisco and Apple focus on higher-end customers than Huawei does, but as each strives to improve in developing markets, the competition with Huawei represents a challenge.

McCourt has an Outperform rating on Apple, Alcatel, and Cisco shares, and an Underperform rating on Nokia shares. He does not formally cover Ericsson stock.