Letter from the Rotating and Acting CEO

The ubiquity of broadband networks and services, the massive number of applications that result in instantaneousness and fragmentation of information, and the demand of device users for a personalized experience combine to present a series of challenges and opportunities to the Information and Communications Technology (ICT) industry. By focusing on the pipe business and effectively improving operations quality, Huawei achieved CNY220.2 billion (US$35.35 billion) in sales revenue and CNY15.38 billion (US$2.47 billion) in net profit in fiscal year 2012, steadily increasing operating performance.

Our Carrier Network Business Group (BG) further consolidated its position in the industry: Our wireless business maintained steady growth. Our fixed network products and solutions have been deployed by most carriers worldwide. Our routers continued to hold an advantage in the carrier market. Additionally, our optical transport and optical access products further established their leadership positions. We launched SoftCOM, the industry’s first software-defined networking (SDN) technology architecture in end-to-end carrier networks. Our carrier software business continued to grow rapidly. Our SmartCare service redefined industry standards for customer experience management (CEM) and comprehensively enhanced user-experience-driven solution capabilities.

Our Enterprise BG launched competitive data center switches, storage products, panoramic telepresence, and other solutions. Our Consumer BG built a solid foundation on product design, quality, and cost. In the fourth quarter of 2012, we entered the list of the world’s top three smartphone makers for the first time. At present, our products serve more than three billion people around the globe.

As communications become an integral part of life, we believe that demand for communications is not closely related to economic cycles and is only moderately impacted by the financial crisis. The reason is that communications services are characterized by small-money consumptions and the communications market is fully competitive. As pipes carry heavy traffic, we deploy products and solutions by focusing on information transmission, forwarding, storage, processing, acquisition, and presentation. Providing user experience characterized by high bandwidths, multiple services, and zero wait time is our mission and responsibility. We will continue to increase strategic investments in the pipe business. Our aim is to make information pipes “wider, faster, and larger” and develop Huawei into one of the great companies that lead the ICT industry.

As we seek effective business growth, we expect that Huawei, a company with 150,000 employees, will continue to be the preferred partner of our customers. “Gaining might from a small hole” is a principle which affirms our customer-centricity and guides us to always focus on external customers for our growth. “Obtaining benefits from one source” is a principle which places focus on high-performing employees, and guides us to adjust internal relationships and determine who we count on for corporate development.By attempting to invert our performance appraisal mechanism in 2012, we delegated the decision-making authority to customer-facing roles and field offices, and allowed them to obtain and share benefits based on their performance, instead of granting benefits top-down. In 2013, we will further simplify management, and encourage outstanding managers and teams to assume greater responsibilities; accordingly, we will provide them with more opportunities and enable them to earn more rewards. In addition, we will continue to reduce internal operating cost and strive to further improve operational efficiency.

Outstanding corporate performance is built on extraordinary leadership and the ability to develop an excellent management team. One of the significant challenges we face is to develop globalization capabilities that are aligned with our global business growth while having the capacity to supervise operations in regional markets. We need more managers who have a global vision, regardless of their nationality or background. To that end, we must establish systems that can identify and deploy talent worldwide. Narrowing the scope of our strategy and focusing on the pipe business will help improve our global competitiveness.

We fully assume our responsibility globally as a corporate citizen while proactively responding to concerns and needs of all stakeholders, including customers and governments. In 2012, we released Huawei Cyber Security White Paper, which inspires thought and discussion about the nature of cyber security. We will strive to ensure the stable and secure operations of customer networks and businesses. We will further increase openness and transparency, and actively communicate with others. We will integrate more proactively into the local communities in which we operate, create more jobs, and contribute more taxes. All these efforts will help boost the competitiveness, economy, and prosperity of local communities.

The responsibility of our management team is to maintain the health and vitality of our company. In the past year, we encountered many challenges. Our good performance would have been impossible if not for the trust and support from our customers and partners as well as the wisdom and courage of our staff. I would like to express my sincere gratitude to all of them. Looking ahead, we are confident in the prospects of the ICT industry despite much uncertainty in the macroeconomic environment and increasingly intense competition in the industry. We will continue to focus on the information pipe business, simplify internal management, and continuously improve efficiency and performance. In 2013, we will continue to maintain our business growth momentum and create a bright future with our customers and partners around the world!

Guo Ping

Rotating and Acting CEO

Much is said about Huawei and our efforts to enrich life through communications.

Find out more about our products, services and the work behind that vision.

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