Huawei 2009 Annual Report Download

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Table of contents

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    ...in 2009 04 Five-Year Financial Highlights 05 Letter from the Chairperson 07 Vision, Mission and Core Values 08 Management Discussion and Analysis 19 Independent Auditor's Report 20 Consolidated Financial Statements Summary and Notes 41 Corporate Governance Report 47 Corporate Social Responsibility...

  • Page 4
    ...IP transformation for our customers. In the Applications and Software domain, our products and solutions benefited customers by offering value-added platforms with increased operational efficiency. Professional Services is a key strategic investment for Huawei and our Managed Services, in particular...

  • Page 5
    ... important initiative, called Integrated Financial Services (IFS), is improving the efficiency of our internal management processes and supporting our global business development initiatives. Huawei is also transforming our organizational structure and our human resource mechanisms. We are moving...

  • Page 6
    ... market share of radio access equipment. Successfully delivered the world's first LTE/EPC commercial network Commercial operation began on the world's first LTE network, built by Huawei, for TeliaSonera in Oslo, Norway. To date, Huawei has been awarded the largest number of LTE commercial contracts...

  • Page 7
    Five-Year Financial Highlights 04 Five-Year Financial Highlights CNY Million Revenue Operating profit Operating margin Net profit Cash flow from operating activities Cash and cash equivalents Working capital Total assets Total borrowings Owner's equity Liability ratio 2009 149,059 21,052 14.1% 18,...

  • Page 8
    ... presented by global climate change, Huawei is helping customers lower energy consumption and carbon emissions through our advanced "green" solutions that create social, economic, and environmental benefits. In 2009, the resource consumption of our main products achieved a year-on-year decrease of...

  • Page 9
    ...-year history, and, with the advent and adoption of mobile communications, we have seen a gradual revenue decrease for these services. Mobile broadband, however, is just entering its golden age, bringing human society to new heights. When traffic and cost challenges are finally addressed, mobile...

  • Page 10
    ... and needs by providing excellent communications network solutions and services in order to consistently create maximum value for customers. Core Values Our core values are deeply rooted in every aspect of our business. They are the internal driving force for the Company and are our commitments to...

  • Page 11
    ... by customer requirements, we gradually build end-to-end integrated advantages across four areas: Telecom Network Infrastructure, Applications and Software, Professional Services, and Devices. We are dedicated to helping operators address their challenges with our ABC strategy: Average Revenue Per...

  • Page 12
    ..., up 30% over 2008, which lays a good foundation for our future revenue growth. Telecom Network Infrastructure In 2009, sales revenue from radio access products increased significantly. In particular, UMTS and WiMAX solutions grew rapidly and GSM and CDMA solutions rose steadily. Huawei has also...

  • Page 13
    ... customers with end-to-end solutions, including our SDP and Digital Shopping Mall Solution, BSS Solution, Digital Home Solution, Rich Communication Solution (RCS), and Mobile Office Solution. As part of our commitment to continuous innovation, we have built several application innovation centers...

  • Page 14
    ... in Europe, the United States and other markets). Our Professional Services business, including Network Integration, Customer Support, Managed Services, Network Technology Services, and Learning Services, recorded considerable sales in 2009, which significantly increased our service revenue and...

  • Page 15
    Management Discussion and Analysis 12 enjoyed rapid growth. The 3G market will continue to grow as more 3G licenses are expected to be granted in emerging markets. Smartphones will also be a focus of greater development and the mobile broadband market will continue to expand. Meanwhile, the video-...

  • Page 16
    ... as product development, procurement, manufacturing, delivery and service, to maintain appropriate profitability level while helping customers to lower their total cost of ownership. Net profit for 2009 was CNY 18,274 million, an increase of 132.8% comparing to that of 2008, driven by revenue growth...

  • Page 17
    .... Financial position CNY Million Non-current assets Current assets Among which: Inventory Trade receivables Cash and cash equivalents Total assets Non-current liabilities Among which: Long-term borrowings Current liabilities Among which: Short-term borrowings Trade payables Owner's equity Total...

  • Page 18
    ... The Company continued to improve trade receivable management. Its DSO of 125 days in 2009 was a 2-day improvement comparing to that of 127 days in 2008. Inventory increased 8.3% year-on-year. Its ITO of 100 days in 2009 was a 10-day improvement comparing to that of 110 days in 2008. Trade payables...

  • Page 19
    .... The Company uses the credit risk evaluation model to determine customer credit ratings and credit limits, and implements various key credit control points in the end-to-end sales and collection cycle. The Company's credit management department routinely evaluates global credit risk exposure...

  • Page 20
    ... million as of December 31, 2008. The Company's products are generally Critical Accounting Estimates The consolidated financial statements on which this management discussion and analysis was based were prepared in compliance of International Financial Reporting Standards (IFRSs), see note 1(a) to...

  • Page 21
    ... and Analysis 18 covered by a warranty for 12 months. The Company accrues for warranty costs as part of cost of sales based on associated material costs, technical support labor costs, and associated overhead. The provision for product warranties issued for fiscal years ended December 31, 2009 and...

  • Page 22
    ... statements") for the financial year ended December 31, 2009. We have issued an unqualified audit report dated March 15, 2010 on the audited consolidated financial statements of the Group for the financial year ended December 31, 2009. Huawei Technologies Co., Ltd. is not a public company and is not...

  • Page 23
    ... 2009 CNY'million Revenue Cost of sales Gross profit Research and development expenses Selling, general and administrative expenses Other operating expenses, net Operating profit before financing costs Net finance (income) / expense Share of losses of associates / jointly controlled entities Profit...

  • Page 24
    ... and Notes Consolidated Balance Sheet Note 2009 CNY'million Assets Property, plant and equipment Intangible assets Investments in associates and jointly controlled entities Other non-current financial assets Deferred tax assets Other non-current assets Total non-current assets Inventories Trade and...

  • Page 25
    ... Financial Statements Summary and Notes 22 Consolidated Statement of Cash Flow Note 2009 CNY'million Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Other operating cash flows Net cash from operating activities Net cash used in investing...

  • Page 26
    ... of preparation Huawei Technologies Co., Ltd. (the "Company") and its subsidiaries (the "Group") have prepared a full set of consolidated financial statements ("consolidated financial statements") for the year ended December 31, 2009 in accordance with International Financial Reporting Standards...

  • Page 27
    .... An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial statements under the equity method. Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group's share of the...

  • Page 28
    ... the consolidated income statement in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the consolidated income...

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    ...as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed. For trade and...

  • Page 30
    ... major structural elements of the design. The accounting policy for contract revenue is set out in note 1(t)(ii). When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the balance...

  • Page 31
    ... flow statement. (q) Employee benefits i) Short-term employee benefits and contributions to defined contribution retirement plans Salaries, annual bonuses and contributions to defined contribution retirement plans are accrued in the year in which the associated services are rendered by employees...

  • Page 32
    ... to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax...

  • Page 33
    ... services are provided. No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due, associated costs or the possible return of goods. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts. ii) Contract...

  • Page 34
    ... as its internally generated trademark, network storage and security appliance technology (including patents, license and in process research and development projects) and customer relationships with carrying value of Nil in the Group's book for the rest 51% equity interest in Huawei Symantec. The...

  • Page 35
    ... government grants of CNY 251,006,000 in respect of its contributions to the development of new high-technology in the PRC (2008: CNY 130,183,000). These grants were directly recognised as other operating income. For the year ended December 31, 2009, the Group received grants of CNY 328,445,000...

  • Page 36
    ... December 31, 2009 is estimated by the directors to be CNY 358,745,000 (2008: CNY 466,386,000). The fair value of investment properties is determined by the Group internally by reference to market conditions and discounted cash flow forecasts. The Group's current lease agreements, which were entered...

  • Page 37
    ... and jointly controlled entities The Group has the following investment in associates: Form of business structure Ownership region Ownership percentage 2009 2008 Research and development, production and sale of TDSCDMA telecom products Name of associate Principal activity TD Tech Holding Limited...

  • Page 38
    ... jointly controlled entity Form of business structure Country /region Ownership percentage Principal activity Research and development, production and sale of network storage and security products Huawei Symantec Incorporated Hong Kong 51% Huawei Marine Systems Co., Limited Incorporated Hong...

  • Page 39
    ... Impairment Unrealised profit Tax losses Undistributed profits of subsidiaries Other deductible differences Other taxable differences Total 2,810 140 545 1,631 1 (493) 20 (138) 4,516 2008 CNY'million 1,755 121 265 889 681 (149) 31 (54) 3,539 10. Inventories 2009 CNY'million Raw materials Work in...

  • Page 40
    37 Consolidated Financial Statements Summary and Notes 11. Trade and other receivables 2009 CNY'million Trade receivables Gross amount due from customers for contract work Non-trade receivables 51,875 4,253 7,154 63,282 2008 CNY'million 44,281 4,682 3,891 52,854 Impairment of trade receivable ...

  • Page 41
    ...the consolidated balance sheet Bank overdraft Cash and cash equivalents in the consolidated statement of cash flows 16 29,216 29,232 29,232 2008 2008 CNY'million 200 20,817 21,017 (4) 21,013 13. Borrowings Terms and conditions of outstanding borrowings were as follows: Total CNY'million EUR USD CNY...

  • Page 42
    ... and services and anticipated rates of warranty claims for new products. The Group expects to settle majority of the liability within the next twelve months. 16. Operating leases Leases as lessee Non-cancellable operating lease rentals are payable as follows: 2009 CNY'million Less than one year...

  • Page 43
    ...The Group leases a number of warehouses, factory facilities, office premises and staff apartments under operating leases. The leases typically run for an initial period of between one and five years. None of the leases includes contingent rentals. During the year ended December 31, 2009, CNY 1,786...

  • Page 44
    41 Corporate Governance Report Corporate Governance Report Shareholders Huawei Technologies Co., Ltd. (the "Company" or "Huawei") is a wholly owned subsidiary of Shenzhen Huawei Investment & Holding Co., Ltd. ("Huawei Holding"). Huawei Holding is solely owned by employees of the Company, without ...

  • Page 45
    ... the Internal Audit Department and Global Process Owners (GPO), such as the Audit Trend Report, the Semi-annual Control Assessment (SACA) and the GPO Internal Control Reports. The Audit Committee also approved the guiding principles on the Business Conduct Guidelines (BCG) compliance. During 2009...

  • Page 46
    ... Committee include: â- Reviewing the Company's medium to long-term business plan and annual financial budget â- Reviewing financial strategies, policies and major transactions in capital structure, corporate financing activities, major investments such as mergers and acquisitions, and divestures...

  • Page 47
    ... with applicable accounting standards and audit procedures, and expresses an opinion as to whether the financial statements are true and fair. Corporate Structure and Organization The Company adopts a matrix structure under the EMT that consists of Strategy and Marketing, R&D, Business Units...

  • Page 48
    ... and Huawei An Integrated Product Development(IPD) process to ensure customer-oriented R&D and an Integrated Supply Chain(ISC) management process to ensure the end-to-end delivery. Transformation of Integrated Financial Services (IFS) that covers all key financial aspects to support the Company...

  • Page 49
    ... internal environments, review and approve the associated risk management strategies and risk mitigating measures for the Company. Control Activities Huawei has established standard business processes globally, and identified Key Control Points (KCPs) and Global Process Owners (GPO) for each process...

  • Page 50
    ... corporate operations, thus minimizing both customers' TCO and the impact on the environment. In 2009, we continued to increase our investment in green solutions and technologies and expanded Huawei's Energy Conservation & Emission Reduction Team. Energy-saving Design Based on Life Cycle Assessment...

  • Page 51
    ... local communication technologies, Huawei has established 36 training centers around the world, which help people develop useful skills. Through various funds for students, scholarships, education networks, and equipment donations, Huawei helps teenagers in Asia, Africa, and Latin America to access...

  • Page 52
    49 Corporate Social Responsibility Contribution to Society As a responsible corporate citizen, Huawei contributes actively to public welfare, education, and disaster relief and aid initiatives for the global community. With these CSR efforts, we provide people in difficulties with opportunities to...

  • Page 53
    ... would like their career to follow at Huawei. Huawei highly values the health of its staff and internal harmony of the organizational climate. To maintain the healthy minds and bodies of our employees, we established the Staff Health Instruction Center and the Chief Staff Health and Safety Officer.

  • Page 54
    ... Exchange Rates Abbreviations 2009 Abbreviations ADSL ARPU ASIC ASON ATCA ATIS BSS CAGR CAPEX CDMA CRBT CSR DECT DSLAM DWDM EDGE EOT EPC FAN FTTx GPON GPRS GSM GSMA HSPA ICT IEC IEEE IFS IMS IP IPD Full name Asymmetric Digital Subscriber Line Average Revenue Per User Application Specific Integrated...

  • Page 55
    ... of Service Radio Access Network Research and Development Return on Investment System Architecture Evolution Service Delivery Platforms Short Message Service Set Top Box Total Cost of Ownership Time Division-Spatial Code Division Multiple Access Transceiver Total Value of Ownership Universal Mobile...

  • Page 56
    ... by revenue, and multiplied by 360 days Inventory turnover days (ITO) Inventories at the end of the year divided by cost of sales, and multiplied by 360 days Days of payables outstanding (DPO) Trade payables at the end of the year divided by cost of sales, and multiplied by 360 days Cash flow before...

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    ..., INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS, BUSINESS, REVENUE, DATA, GOODWILL OR ANTICIPATED SAVINGS ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS MANUAL. HUAWEI TECHNOLOGIES CO., LTD. Huawei Industrial Base Shenzhen 518129, P.R.China Tel:+86-755-28780808 Printed...