China's ZTE eyes quadrupling of enterprise communications revenues
Undeterred by its recent pounding in Congress, China's ZTE is pushing ahead with plans to expand its enterprise communications equipment and services business, which it predicts will quadruple in revenue over the next three years.
During recent hearings before the House Intelligence Committee, officials from ZTE and Huawei took heat from lawmakers over allegations that the firms put backdoors in their telecom equipment, enabling the Chinese government to carry out industrial espionage. The companies vehemently deny the charges.
Some in Congress are threatening to block the Chinese telecom companies from the US market. Such a move would have a major impact on ZTE's plans, since the US market would be key to any expansion.
In the Chinese enterprise communications equipment market, ZTE faces competition from Huawei, as well as Western firms Alcatel-Lucent (NYSE: ALU), Cisco (NASDAQ: CSCO), Ericsson, Nortel and Siemens (NYSE: SI).
ZTE is confident it can take advantage of its market position in the government, large enterprise and heavy industry markets. ZTE Vice President Xu Ming said its enterprise business will grow 70 percent this year compared to last year, according to a report by the Wall Street Journal.
ZTE currently has 25 percent of its research and development engineers working on its enterprise communications offering, a number the company would like to expand to 30 percent by the end of 2015
As part of its expansion plans, Ming said, the company will focus on growing niche markets, such as the railroad communications sectors. ZTE currently holds more than half of the Chinese market and hopes to expand into the neighboring markets of Russia and Central Asia.
Huawei has enterprise expansion plans of its own. It only recently set up its enterprise business division, but already reported sales of $1.6 billion, mostly in the government and small and mid-sized business segments, according to Forrester research.
The core product areas for Huawei's enterprise push are networking solutions, security offerings, unified communications and cloud data centers. The company offers enterprise networking products such as routing and switching, servers, storage, security, virtualization and professional services.
According to a recent Gartner report, China IT spending is predicted to exceed $311 billion in 2012, making it the largest IT market among emerging economies. This market presents huge opportunities for Chinese and Western enterprise communications firms alike.