Apple and Huawei – Zen and the Art of the Long View

Article first published as Apple and Huawei – Zen and the Art of the Long View on Technorati.

The telecoms and technology markets have always taken the long view with regard to product and business development. This week has seen two companies look to the future in different ways. Apple, the original Zen Master of strategy, coming to grips with an apparent hiccup in their recent string of successes and Huawei struggling in the aftermath of rejection by the U.S. government.

Apple has been in the press recently due to the substantial fall in its stock price and the increasing demands from shareholders to receive part of the $145 billion cash mountain that it has amassed. Apple CEO, Tim Cook, finally acquiesced and has just announced a capital buyback program that will increase the return to shareholders from $10 billion to $60 billion, as well as increasing its quarterly dividend by15%. This may quell the unrest of Wall Street investors in the short term but it exposes the company to a significant long term threat to their enterprise viability due to their increasing risk adversity and lack of innovative product introductions, particularly when compared to those of Samsung. It’s very easy to slip from grace and require cash to sustain operations if you miss market turning points – have a look at what happened to Motorola, Nokia and Rim! Steve Jobs, with his Zen Master ability, excelled at recognizing long-term future opportunities and betting the company in order to secure that future. He was protective of the cash, understanding that to “bet big” you need to cover the downside mistakes. Unfortunately, that doesn’t appear to be the case with Apple today.

Contrast this with Huawei that announced within the last 48 hours that it would abandon its pursuit of penetrating the North American telecoms network market after five years of battling the U.S. government. At the same time as this apparent retreat, however, Huawei has begun focusing on building its consumer product brand in the U.S. The company’s introduction of new products at this year’s CES gave it significant presence, and this month it announced a new marquee handset along with sponsorship for the Jonas Brothers tours, starting in Chicago. Huawei appears to be adopting a long term strategy to establish itself at the heart of the U.S. psyche as a “brand of trust”, potentially making it more difficult for them to be politically blocked in the next round of network purchases. Equally, since 4G networks have effectively been sold and rolled out in the U.S., the market opportunity is now elsewhere. The reality is that the market momentum of Huawei globally over the next five years will probably cause two of the five remaining network providers to be eliminated, meaning that Huawei will be the only real alternative to Ericsson when network operators look to upgrade their systems in 5 years time. The bet is that the U.S. government will have little choice but to reluctantly accept Huawei, even if it’s not with open arms.

The Zen Master, it seems, has actually moved back to China.

Steve Bell, President, KeySo Global

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