Huawei staff fear cuts as smartphone profits disappoint

HONG KONG/BARCELONA: Staff at China´s Huawei Technologies Co Ltd are bracing for possible jobs cuts after internal memos highlighted intense pressure to improve earnings and an executive said the flagship smartphone business had missed internal profit targets.

Huawei, which rose rapidly to become the world´s third largest smartphone maker, is aiming to narrow the gap with leaders Apple Inc and Samsung Electronics. But the company faces challenges after losing its top spot in China, the world´s biggest market, to new contender Oppo last year.

Huawei´s mobile unit missed an internal profit target for 2016 even though revenues exceeded targets, Richard Yu, head of its consumer business division that includes mobile device operation, told Reuters in an interview at the Barcelona Mobile World Congress this week.

"It is still profitable but the profit margin is very low," Yu said of the unit that contributes around one third to the group´s revenue. In an internal memo sent last Friday, Huawei Group founder and CEO Ren Zhengfei urged all employees to work hard, saying the company would otherwise "fall apart".

"Thirty-something strong men, don´t work hard, just want to count money in bed, is that possible?," Ren said in the memo seen by Reuters." Huawei will not pay for those that don’t work hard.

"The remarks have unnerved some of Huawei´s 170,000-strong workforce, 45 percent of which are in research and development, a division said by Huawei staff in online communities to be most insecure.

"Everybody is nervous," said a 36-year old engineer in Huawei’s consumer business unit who declined to be identified due to the sensitivity of the issue. "We are now all thinking more of the next steps, realizing permanent employment with the company is no longer a given.

"According to company insiders, Huawei maintained its 5 percent annual quota to eliminate the worst performers, but was seen indirectly pushing underperformers out by asking them to relocate to undesirable posts.