By Nicola Leske
n">(Reuters) - Huawei's head of research and development in North America
said his company is more than ready to take on larger rival Cisco Systems but
noted it will take some patience -- and time.
"The U.S. is by far our most complex market ... for us our entrance into the
U.S. is similar to a western company entering China," John Roese said in an
interview with Reuters on the sidelines of IT infrastructure conference Interop
in Las Vegas.
For a decade, China-based Huawei with U.S. headquarters in Plano, Texas, has
been selling infrastructure to U.S. telecom operators. It sells routers and
switches that move data through networks and devices such as modems and
smartphones, but now it aims to provide equipment to large businesses, a market
dominated by Cisco Systems.
Huawei in September of last year launched its enterprise unit and aims to
generate $15 billion worldwide in revenue by 2015. This year it sees deals
totaling more than $7 billion worldwide and expects to invest $4.5 billion in
research and development.
The enterprise unit provides equipment such as hubs, routers and switches
that run networks transferring data across corporations.
"We basically said it will take a few years to get to critical mass but the
U.S. is not critical to our revenue objective," Roese said.
Huawei's enterprise unit revenue rose 57.1 percent in 2011 to 9.16 billion
yuan ($1.45 billion), making it the fastest growing division though it
contributes only 4.5 percent of total revenue.
Roese, a technology veteran who has worked at Nortel, Broadcom, Enterasys and
Cabletron, said the company had not publicly set any financial goals for the
U.S. market but he made it clear that Huawei has what it takes to be a
formidable rival to Cisco in the United States.
Cisco is the world's leading maker of networking gear.
"There really has not been a legitimate major competitor for Cisco for a long
time ... and in comes Huawei and we are not a small player," Roese said.
Cisco's Chief Executive John Chambers has repeatedly called Huawei its
toughest rival in the enterprise market and promised to be compete
aggressively.
In 2003, Cisco sued Huawei for allegedly infringing on some of its patents.
Huawei removed the contested parts and the case was dropped.
ANNOUNCES NEW DEALS
Cisco's executive vice president Rob Lloyd implied that Huawei was still
imitating and not innovating and questioned its security credentials:
"We clearly know that our customers view innovation from Cisco and they don't
see the same from Huawei. We would clearly say that imitation isn't innovation,"
Lloyd said on the company's earnings call this past Tuesday.
"The privacy of information, how data is protected is forefront in our
customers' mind in a cloud centric world. That's not the forte of Huawei," Lloyd
also said.
Roese shrugged off the comments.
"If they want to declare us public enemy No 1 and their biggest threat, I am
glad to take that compliment," Roese said, adding that currently Huawei was
still too small a player in the U.S. to compete with Cisco.
But it's certainly gearing up to take on Cisco.
Huawei this week announced its first U.S. distribution agreement with
IT-distributor Synnex that will allow it to expand its presence in the U.S.
enterprise market
It is also launching new products that compete with Cisco's telepresence
offerings and network switches.
Still, the United States has been a difficult market for Huawei to crack as
some U.S. politicians are wary of the company's secretive founder and Chief
Executive Ren Zhengfei, a former Chinese military officer. There are also
concerns regarding the security of its hardware.
Roese said Huawei was currently not doing business with the U.S. federal
government or the financial services market.
"We have to get a few things behind us before we can sell to the federal
government," Roese said.
Huawei has been at pains to overcome national security concerns in the U.S.
and was dealt a fresh blow this week when the House of Representatives Armed
Services Committee adopted legislation that included a measure to root out any
technology produced by Huawei in the United States nuclear weapons complex.
Roese added that it did not have the necessary distribution channels needed
to serve the financial services industry yet.
The company is focused on supplying businesses in the health care industry
and education sector with its products such as telepresence equipment and data
center switches, Roese said.
"We are definitely in a building phase and we are very patient," Roese said
and quipped that thanks to Cisco the company was at least getting some free
advertisement.
"I joke that our biggest ally in educating people who we are has been Mr.
Chambers. He has done a fantastic job teaching people how to pronounce our
name."
($1 = 6.3106 Chinese yuan)
(Reporting by Nicola Leske; Editing by Bernard Orr)
