China's Huawei targets Amazon, Alibaba in public cloud service push

[April 11, 2017]  By Sijia Jiang

HONG KONG (Reuters) - Chinese telecoms equipment and smartphone maker Huawei Technologies Co Ltd [HWT.UL] on Tuesday said it aims to compete with Amazon.com Inc  and Alibaba Group Holding Ltd  as a global provider of public cloud services.

The Shenzhen-based firm, which last month reported its slowest profit growth in five years, said it will expand in cloud computing with a dedicated division that will recruit 2,000 more people this year.

"We used to focus on private cloud and did well," Zheng Yelai, president of the new unit, said at an annual analyst meeting. "Now the purpose is to strengthen our public cloud offering."

Public cloud services involve shared data infrastructure, rather than dedicated infrastructure built for single customers. Consultancy Gartner expects the market for public cloud services to reach $383 billion by 2020 from $247 billion in this year.

By expanding in cloud computing, hardware-focused Huawei hopes to continue developing software-based revenue at a time of slowing growth in smartphone sales and reduced spending on telecommunication infrastructure.

In China, its biggest rival in public cloud services would be Alibaba Cloud, while the latest market entrant is conglomerate Dalian Wanda Group Co Ltd in partnership with International Business Machines Corp.

Zheng declined to say when Huawei aims to beat Alibaba, which is also a client of Huawei's IT infrastructure and services.

Eric Xu, deputy chairman of Huawei's board and one of three rotating chief executive officers, said Huawei's global network of telecoms clients give the firm a unique advantage.

"I believe we can build upon our advantages accumulated over the years," Xu said, referring to carrier partnerships in Europe and a strong presence in developing countries.

Visitors walk past Huawei's booth during Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Eric Gaillard/File Photo

"Compete and coexist with AWS and Microsoft, I believe that is the trend we are going to see." Xu said, referring to Amazon Web Services and Microsoft Corp's Azure.

Xu also said Huawei would not compete for market share by offering services at extremely low prices.

Last month, Tencent Holdings Ltd <0700.HK> won a cloud computing contract with a bid of just 0.01 yuan. Rivals complained of unfair competition, local media reported, but Tencent told Reuters that the case was a one-off.

"Our strategic focus will be on our telecom partners' cloud transformation," Xu said.

Huawei's comments come after the Ministry of Industrial and Information Technology on Monday published a Cloud Computing Development Three-Year Action Plan. The ministry forecast the domestic cloud computing industry to grow to 430 billion yuan ($62.32 billion) by 2019, from 150 billion yuan in 2015, and said "two to three leading global players" would emerge.

Huawei earlier said it expects its cloud computing revenue to reach 10 billion yuan by 2020.

(Reporting by Sijia Jiang; Editing by Christopher Cushing)

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