In recent times, there have been a series of speculations that Huawei will sell off its sub-brand, Honor. In fact, the latest report claims that the deal is already done. This means that Huawei no longer owns Honor. However, Honor has been very silent regarding all the rumors. Nevertheless, a spokesperson from Huawei still technically denied the sales. Huawei’s response to the Honor sale report is “It is still in the rumor stage”.
The initial report claims that Huawei has sold Honor Digital China and the government of Shenzhen. However, Digital China has made it clear that it did not place any bid for Honor. Whether Huawei will officially sell Honor is still largely a rumor. Although the reports of the sales have been on the web since September, there is no official backing. Thus, we can treat the ales of Honor as a rumor and that’s it.
Analysis of Honor’s potential sale
Regarding the sales of Honor, here is what investment partner, Bu Rixin has to say…”The news of Huawei’s sale of Honor actually hit public doman very early. But the heat has been getting higher recently. Huawei’s chip procurement and its own chip foundry business have not shown clear signs of easing. If this continues, it will inevitably affect the normal development of Huawei’s mobile phone business. Therefore, if it is divested and independent of Huawei, Honor will not be restricted by the ban and continue to develop business cooperation with mainstream chip manufacturers such as Qualcomm and MediaTek”.
From speculations, the transaction price will be based on Honor’s last year’s profit of 6 billion yuan ($908 million). This is 16 times the PE (Profit/Earnings) ratio which is about 100 billion yuan ($15.1 billion). Also, Honor has multiple management holdings in the company.
Bu Rixin believes that under the current situation, this mode of operation is beneficial to all parties. “Huawei can avoid the stagnation of Honor’s mobile phone business and obtain a high premium for acquisition; after the spin-off of Honor from Huawei, it can develop more independently; while the acquirer has acquired technology, team, and high-quality assets.”
The ban on Huawei has made the company’s smartphone business unstable. Nevertheless, the company is still doing well in China. According to a recent report, Huawei currently has over half of the Chinese 5G smartphone market. This value is expected to drop as Apple’s new 5G iPhones hit the Chinese market.