(Yicai Global) March 21 -- Huawei Technologies will not be entering the market for enterprise resource planning software, as its recently announced MetaERP system is only for internal use, according to an insider at the Chinese telecoms giant.

The news that Huawei will enter the ERP software market is a misinterpretation, Shanghai Securities News reported yesterday, citing the source at the Shenzhen-based company.

Huawei founder Ren Zhengfei recently said the firm will launch MetaERP in April. It uses Huawei's own operating system, database, compiler, and language, he added, noting that MetaERP has already passed internal testing.

The announcement was taken as a sign that Huawei was about to hasten its entry into the software domain. The shares of leading Chinese ERP system suppliers Kingdee International Software Group and Yonyou Network Technology plunged amid concerns over fiercer competition.

Huawei directs a large chunk of its research and development spending on software, an insider at the firm told Yicai Global. Just as with lithography machines in chip manufacturing, software development also needs many indispensable tools, the person added, noting that only controllable and homemade R&D tools can guarantee that the company's core businesses are safe.

“There're no impacts at present,” a Kingdee executive told Yicai Global yesterday, noting that Huawei uses Kingdee’s human resources system. MetaERP is for internal use, but even if the system was externally oriented, Kingdee is a strategic partner, the person added.

The market has over-interpreted the news of Huawei's entry into the ERP sector, Beijing-based Yonyou Network said to Yicai Global. From the industry's perspective, it takes three to five years to produce a mature ERP product, and Huawei is using its software internally, which has a limited impact on the existing competitive landscape, the company added.

Kingdee’s stock [HKG: 0268] surged 9.8 percent today to close at HKD14.54 (USD1.85), after slumping 18.8 percent yesterday. Yonyou Network [SHA: 600588] fell 0.4 percent to CNY25.30 (USD3.68). Yesterday, it plunged by the 10 percent exchange-imposed limit.

Editor: Futura Costaglione