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Huawei sales up 18% but US pressure means tough times ahead

BEIJING (AP) — China's Huawei Technologies said Tuesday that its sales rose a lower-than-projected 18% in 2019 and predicted tough times ahead as the U.S. moves to restrict its business. The flash sales estimate came in an annual New Year's message to employees. Chairman Eric Xu warned that mediocre managers would face demotion as the telecom giant and leader in 5G mobile technology focuses on survival.

“It's going to be a difficult year for us," he wrote, calling on the company's more than 190,000 employees “to work hard and go the extra mile to bring their capabilities to a new level.” No one is predicting Huawei's demise. The unlisted company, a major maker of both mobile transmission equipment and handsets, estimated that 2019 sales would rise to more than 850 billion yuan ($120 billion).

“These figures are lower than our initial projections, yet business remains solid and we stand strong in the face of adversity,” Xu said in the letter, which was released to The Associated Press and other media.

Huawei, based in the tech hub of Shenzhen in southern China, typically releases its official and audited annual financial results in March. Zou Zhidan, an analyst at the consulting firm Zero Power in Shenzhen, said that given Huawei's size and the breadth of its business, it won't face a survival crisis. Rather, it will face obstacles to progress and pressure on its rapid profit growth, he said in an email response to questions.

Zou noted that Huawei enjoys a relatively good reputation outside of the U.S. and will benefit from its leading position in the still nascent 5G market. “The difficulties for Huawei in 2020 won't be small, but the company has its own strengths," Zou wrote.

The U.S. government says Huawei technology poses a security risk and has urged other countries not to buy its 5G mobile network equipment. It has also put Huawei on its entity list, blocking U.S. technology sales to the company. Huawei denies the allegation.

Calling difficulty the prelude to greater success, Xu said America's “strategic and long-term” campaign against Huawei is an opportunity to build up some muscle and build capabilities to navigate future challenges.

“Despite concerted efforts by the U.S. government to keep us down, we've made it out the other side and continue to create value for our customers,” he wrote. The five-page letter exhorts employees to hone their skills and rid themselves of complacency. Saying that survival is the company's top priority, Xu warns that mediocre managers “who have lost their enterprising spirit” will be removed faster than before.

Associated Press researcher Yu Bing contributed to this report.

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