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Huawei Profit Declines 22% as Competition Intensifies

Huawei Technologies Co., China’s biggest maker of phone-equipment, posted a 22 percent drop in first-half operating profit as competition intensified in the telecommunications industry.

Operating profit in the first six months was 8.79 billion yuan ($1.4 billion), Huawei said in an e-mailed statement yesterday, without providing a year earlier figure. Revenue gained 5.1 percent to 102.7 billion yuan, the Shenzhen-based company said.

Huawei joins smaller cross-town rival ZTE Corp. (763) in reporting a decline in profit as the Chinese companies compete with firms including Ericsson AB, Cisco Systems Inc. (CSCO) and Nokia Oyj (NOK1V) to sell mobile-phone networks, office communication systems and handsets in China and overseas. The slowing global economy hampers industry growth, Huawei spokesman Scott Sykes said.

“Competition in this industry remains fierce,” Sykes said by telephone yesterday. Some Huawei customers are reducing their spending, he said.

ZTE said this month its first-half profit may have declined as much as 80 percent because of reduced investment income, foreign-exchange losses and delayed network contracts.

Ericsson, the world’s largest maker of mobile-phone networks, last week posted second-quarter profit that missed analysts’ estimates as carriers curbed spending to cope with a slowing economy. Alcatel-Lucent SA (ALU), France’s largest phone-gear supplier, has predicted it will miss a 2012 profit target.

Huawei expects to meet its full-year business goals, Sykes said. In April, the Chinese company said its target was to increase revenue in 2012 by between 15 percent and 20 percent. Huawei is closely held.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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