Huawei’s founder rejects possibility of stock market listing

Daniel Thomas

Ren Zhengfei, the founder of Huawei, has described shareholders of public companies as greedy and short-termist, in a forceful rejection of the idea of listing the Chinese telecoms equipment maker.

"In reality, [public] shareholders are greedy and want to squeeze every bit out of a company as soon as possible," he told a gathering of western journalists in London. "People who own this company are not greedy . . . Not listing on the stock market is one of the reasons we have overtaken our peers."

An employee uses a computer as she deals with a customer at a Huawei store in Beijing on March 24, 2014.
Mark Ralston | AFP | Getty Images

In the rare discussion, Mr Ren said Huawei was already transparent enough in its dealings without a listing, in spite of the concerns raised in the US and Australia about connections to the Chinese state.

The debate has been reversed in recent months after documents from Edward Snowden suggested that the US National Security Agency had itself been hacking into Huawei's corporate servers.

Mr Ren said that he had held suspicions that the company was being monitored, but used the Snowden disclosures to emphasize that nothing was being hidden by the Chinese group.

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"The monitoring behavior by the United States is within expectations," he said. "I believe that there is no secret around myself. Huawei's approach has [always] been open."

Even so, he said Huawei would strengthen protection around the "higher-end technologies" being created by the group, which has become a leading provider of equipment and services in areas such as telecoms networks and smart devices.

Mr Ren's role in the Chinese military until 1983 has caused longstanding suspicion about the involvement of the Chinese state in Huawei, which has grown rapidly from an initial investment of Rmb21,000 in 1987, to a multinational corporation that generates about $40bn in annual revenue.

The group was banned from bidding on certain national contracts in Australia, while a US congressional report raised fears about Huawei's links with the Chinese state, although the report presented no evidence of actual wrongdoing. Huawei has been forced to curtail its involvement in the US market as a result of the suspicions.

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Mr Ren said there was no need for a public listing to provide greater transparency, instead pointing to dangers of shareholdership. Huawei workers are offered a stake in the company, which Mr Ren said meant there was a "longer-term view".

Mr Ren holds the position of chairman and maintains a veto on decisions, even though there are three rotating chief executives under him with operational control.

He has never used the right of veto, he said, instead preferring to talk to his senior management. The future leadership structure of Huawei had not been settled, he added. "Ultimately we want to find a mechanism for succession," he said.

Mr Ren said that revenues could double in the next four years to between $70bn and $80bn. However, he ruled out making any acquisitions to boost its business in smart devices or telecoms equipment in the short term.

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Huawei's revenue rose almost 12 per cent last year to $39.5bn, generating a net profit of $3.5bn. In 2013, Huawei invested $5.1bn in research and development, and Mr Ren said it would continue to focus on developing new products.

He said Huawei would also keep investing in countries such as the UK and parts of Europe that have been more welcoming to the Chinese company. Continued investment in businesses in the region would mean that in future it would be perceived as a European company, he added.

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A 'shy' man who regrets not fulfilling his filial duties

Ren Zhengfei provided a rare insight into the motivations of a "shy" man with almost no hobbies who has created one of the world's largest technology groups in spite of early setbacks.

"Work and making money – there are no other hobbies," said Mr Ren, founder of Huawei, as he described a hard early start to life in a poor family that spared little time for personal interests. "My personal life is not that colourful," he said.

On prompting by an adviser, Mr Ren disclosed that he enjoyed reading and drinking tea – specifically, of the British afternoon variety.

Mr Ren had never spoken to the Western press until recently, which he acknowledged had created a reputation of himself as mysterious. But he said this was "maybe because I am a person who is shy."

However, he then opened up about his personal life at a meeting in London, describing how after leaving the Chinese army in 1983, he headed to Shenzhen to start his own business.

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Mr Ren was let go from the army at a period when non-combatant officers were being cut back, which he said was accepted reluctantly given the progress he had made.

A salary of $30 a month was difficult to leave behind, he added, until he got to Shenzhen and realised that workers were earnings $50 a month.

However, his initial business attempts were set back by duplicitous partners. "It turned out that I was cheated by the others in the business," he said.

This forced him into learning about how the law worked, which led to a realisation about how to benefit from the shift happening in China from a controlled to a market economy. He grasped that the key element of business under his control was the quality of the supply chain, which began a life-long obsession with research and development.

Even so, he said that many of Huawei's Shenzhen peers from that period had died away, making him a "moth surviving the flames". The one word that summed up his experience of Shenzhen was "pain", he added, as a succession of challenges during that period exhausted him.

But the biggest pain for Mr Ren is a personal one. "I didn't fulfil my obligations to my parents," he said, which has left him with a "life-long regret".

—By Daniel Thomas of The Financial Times