ERIC Ericsson

   By Dan Strumpf 
 

SHENZHEN, China--Huawei Technologies Co. said its profit growth slowed last year as margins fell and it invested more money in its consumer business.

The Chinese telecommunications company is the world's third-largest smartphone maker by sales after Samsung Electronics Co. and Apple Inc. It also is a major producer of wireless equipment, competing with Ericsson and Nokia Corp.

Despite its large footprint globally, Huawei has only a small presence in the U.S., where its networking equipment is effectively locked out due to concerns that the equipment could be used by Beijing to spy on Americans. The company has repeatedly denied the accusations.

Huawei, founded by former Chinese army engineer Ren Zhengfei, has still sought a foothold in the U.S. It has been stepping up efforts to sell its phones in the country, and this year launched its high-end Mate 9 smartphone there for the first time.

But cracking the American market is a challenge for Huawei because it lacks partnerships with major carriers, which distribute the vast majority of phones in the U.S. The Americas region accounted for 8% of revenue last year, Huawei said Friday, while China accounted for 45% and Europe, the Middle East and Africa made up nearly a third.

The company said Friday its full-year net profit edged up 0.4% to 37.1 billion yuan, or about $5.39 billion, from 36.9 billion yuan in 2015. Revenue jumped 32% to 521.6 billion yuan, as all three of its major business lines saw growth.

Revenue at Huawei's consumer business segment, which includes its smartphone business, rose 44% to 179.8 billion yuan, accounting for more than a third of all revenue.

The company shipped more than 139 million smartphones last year.

"In 2016, Huawei maintained its strategic focus and achieved solid growth," said Eric Xu, Huawei's current CEO.

A higher share of profits from its consumer business group and increased investment in that area led to lower overall margins last year, Huawei said. Its profit margin fell to 7.1% from 9.3% in 2015. The company says it doesn't pursue high profitability.

Huawei's biggest revenue generator remained its networking-equipment business, where revenue rose 24%. Revenue in its enterprise business division, which supplies internet infrastructure such as data centers, rose 47%.

Write to Dan Strumpf at daniel.strumpf@wsj.com

(END) Dow Jones Newswires

March 30, 2017 23:14 ET (03:14 GMT)

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