Richard Yu, CEO of Huawei's consumer business group, has set the cat amongst the pigeons, by saying that Huawei were considering acquiring Nokia; “We are considering these sorts of acquisitions; maybe the combination has some synergies but depends on the willingness of Nokia. We are open-minded,” he stated during a launch event in London, UK, for Huawei's Ascend P6 smartphone.
Nokia’s share price jumped 11% on the news, but ABI considers this to be an unlikely event. Mr. Yu talked about “some synergies”, but these are not what they once were. Huawei’s main challenge (in common with most Chinese consumer electronics vendors) is a lack of brand equity, which means it struggles to sell high end devices. Yesterday’s launch of the Ascend P6 further re-iterated Huawei’s desire to be seen as more than a cheap feature phone provider. Mr Yu acknowledged that Huawei were known for cheap and basic “feature” phones, but will move towards only selling “smart” internet connected phones using its own brand name rather than selling “white label” versions through network operators/carriers.
As for these “synergies”; while not necessarily irredeemable, Nokia’s brand is currently yesterday’s brand (comments like “Do you remember the days when everyone had a Nokia” are not uncommon) and Nokia’s supply chain and distribution are no longer the powerhouse they once were and most importantly no improvement to Huawei’s supply chain. Nokia’s IP portfolio is valuable and would have an impact on Huawei’s cost to build, but I am unconvinced. Huawei’s lack of past acquisitions is further evidence to suggest this is an unlikely scenario.
I suspect the source of the comment is a little more prosaic. Simply Huawei is looking for publicity, due to the Ascend P6 launch and wanting to make a statement of intent (i.e. we are the new coming brand/wave). The Financial Times stated “Mr Yu’s bullish comments underline the company’s rapid progress in the mobile phone market and its ambitions to challenge Samsung and Apple for leadership of the smartphone market.” So mission accomplished in that regard. N.B. Lenovo did something very similar with BlackBerry in January.
An even simpler explanation, may be that Mr Yu was being quite free with his words and providing a few headaches for his PR team, as verbose chairmen and CEOs can do from time to time. The company were quick to quash speculation this morning.