HUAWEI Intends To Loan $1 Billion 500 Million &Nbsp, Forced Capital Pressure Or Listing.

Apart from the controversial corporate culture, HUAWEI's unique financing and ownership structure is also one of the biggest debates in the industry.

In May 18th, a HUAWEI will financing The news of 1 billion 500 million dollars was thrown into the spotlight again. It is reported that about 10 banks are bidding for HUAWEI financing. News comes, financing causes, capital The topic of investment and whether it will consider listing and financing is once again hot topic in the industry. Reporters call relevant people on HUAWEI related issues, but the other side said: "in the short term, we can not reply to this."

"Tight funds must be the main cause of financing, but mainly in the late stage. strategy Transformation is closely related. HUAWEI originally focused on commerce and did not enter the service sector, but since the launch of cloud computing last year, it has loomed the momentum of service providers turning into TMT (broadly referring to telecom, IT and mobile Internet industries). Mao Qiying, a senior communications observer, analyzed in an interview with reporters.

Financing preparation strategy spanformation

In the speech on President Ren Zhengfei's 2010 annual report, Mr. Ren Zhengfei summed up the vision of the industry: the telecommunications industry is at a new starting point for development. For the industry opportunities described by Ren Zhengfei, insiders believe that the specific performance is cloud computing and mobile Internet.

In December 8, 2010, HUAWEI officially released the cloud computing strategy and end-to-end solution in Beijing. HUAWEI's cloud computing strategy includes 3 aspects: building a cloud computing platform, promoting resource sharing, efficiency improvement and energy saving and environmental protection; promoting business and application cloud; promoting the application of Xiang Yun computing migration in various industries; opening cooperation and building a win-win ecological chain.

"HUAWEI's push for cloud computing is very strong, and enterprises will be spanformed accordingly. In this case, services will extend to the mobile Internet and other fields, and the demand for capital will be great. And now HUAWEI's business profit is not very ideal, financing is for the development of late business development ", for the financing of the bank, Mao Qiying analysis," four lines must have a share. "

For the choice of loan financing, Yu Bin, an international watchdog, believes that loans are more cost-effective than shares. If it is financing overseas, the loan interest rate will not be 2%. Our country now has 5% inflation and more money. Of course, foreign capital is not philanthropist. They can earn at least 30% by RMB appreciation in 5 years. It should be a win-win solution.

Three methods of financing simultaneously.

From past information, HUAWEI financing is commonly used in three ways: the sale of its product line equity, loans, internal financing.

Among the three financing methods, the way of refinancing assets is always an important means of financing for HUAWEI. In 2001, HUAWEI sold power and computer monitoring to Emerson for 780 million US dollars. In 2005, HUAWEI sold H3C enterprise network and data communication business to 3Com for 800 million US dollars. In 2008, HUAWEI planned to sell the terminal business, but at that time, it was finally unable to cash in because of the financial crisis. But at the end of the year, HUAWEI launched a new round of internal staff financing.

Because of the difficulty of financing private enterprises at the early stage of establishment, HUAWEI used the way of full shareholding. In the late 90s of last century, HUAWEI launched an employee stock ownership plan with a price of 1 yuan per share. Since 2001, HUAWEI has implemented the option reform. After the completion of the reform, the stock acquired by the employees has been spanformed into a virtual restricted stock, the so-called "option". Based on the positioning of shareholders, employees can concentrate on attracting talents at the same time. According to HUAWEI's practice, if employees leave HUAWEI, they will sell the shares held in their hands, and the purchase price will be the same as the original purchase price.

However, the disadvantage of full shareholding is that Ren Zhengfei's shareholding ratio has been diluted, but once it is listed, the holding situation is bound to waver. In 2009, HUAWEI annual report showed that the Shenzhen HUAWEI Klc Holdings Ltd trade union committee held 98.58% of the company's shares, while Ren Zhengfei held only 1.42% of the shares.

In addition, HUAWEI has brought large amounts of capital to the company by financing the accounts receivable ahead of schedule. Public information shows that in 2004, HUAWEI signed an agreement with the National Development Bank. Under the agreement, CDB will provide a total of 10 billion US dollars in financing in the next 5 years.

Or simultaneous listing at home and abroad

With the support of the above three financing methods, HUAWEI's capital is not troubled, but the financial crisis in 2008 has broken this delicate balance. After the outbreak of the financial crisis, operators in overseas markets are facing great financial pressure. In order to save costs, they have to choose to cut down expenses. At the same time, telecom giants are taking low price strategy, and HUAWEI's low price advantage is weak.

As an enterprise based on the international market, the North American market has always been a hard nut to crack in the HUAWEI market. For this reason, HUAWEI has tried various ways to intervene in the market, for example, through acquisitions. However, in 2007, HUAWEI's acquisition of the US 3Com spanaction failed to get the US government's review process. Ni Guangnan, a academician of the Chinese Academy of engineering, said in an interview with the Securities Daily reporters that the United States would deliberately protect in certain areas. This is one of the important reasons for HUAWEI's acquisition.

Under the continuous overseas expansion strategy, although HUAWEI's revenues continue to rise, its operating profit and net profit margin are far less than that of revenue growth. From 2006 to 2008, the operating margins were 7.3%, 9.7% and 12.9% respectively. In 2009 and 2010, operating margins increased to 14.1% and 15.8% respectively. In addition, the asset liability ratio remains high. In the 5 years since 2006, HUAWEI's assets and liabilities rates were 64.4%, 63%, 68.3%, 69% and 65.6%, respectively.

Recently, a media report said that a mail issued by HUAWEI CEO Office showed that because of the decline in business revenue of R & D and solution operators in the first quarter of the company, it was significantly lower than the expected target, and employees would face a situation of pay reduction.

If the capital chain is not as good as expected, will HUAWEI consider listing financing? Mao Qiying thinks. "Do not exclude this possibility. Since last year, HUAWEI has undergone many changes in detail. Ren Zhengfei's attitude toward the media has changed dramatically, and the information of the company has been spanparent. The behavior of financing and improving the financial position also reveals the intention of going public. All of these convey similar signals. Information spanparency is the first step, and financial support from banks is the second step.

If HUAWEI goes public, Mao Qiying believes that the most likely way is simultaneous listing at home and abroad: "HUAWEI's situation is fully consistent with the conditions of international listed companies, although its foreign revenue is a big head, but when listing, it should not abandon the A share market, the most likely is the simultaneous listing at home and abroad."