ZTE Touts 2007 Profit Hike

Chinese equipment vendor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) expects to announce an increase in annual profits of at least 50 percent when it reports its full 2007 earnings results. (See ZTE Touts 2007 Growth.)

The company, which generates much of its sales from mobile (GSM and CDMA) infrastructure and handsets, but also sells fixed-line access and optical gear, IPTV systems, and IMS elements, says its “aggressive expansion” overseas has helped it to boost 2007 net income by between 50 and 70 percent compared with 2006. (See ZTE Aims to Boost IMS, ZTE Scores IPTV Win, ZTE Unveils GPON Gear, and ZTE Touts CDMA Share.)

The company is still working out its full-year numbers but notes that its international sales for the first nine months of 2007 more than doubled year-on-year, accounting for more than half of all revenues during that period.

ZTE cites India, Africa, and Southeast Asia as key growth markets but also mentions it has benefited from “strategic partnerships with top-tier and mainstream providers” in developed markets, too. And the vendor has already said it expects to generate $1 billion in revenues in India during 2008. (See ZTE Sets Indian Target, ZTE Boasts Success, ZTE Wins Libya WiMax Deal, ZTE Bullish on Emerging Markets, ZTE Wins at Telkom, ZTE Wins Sprint WiMax Deal, ZTE Wins in Poland, ZTE Builds MTN Backbone, ZTE, Telefónica Develop Phones, and Vodafone Picks ZTE Handets.)

But while a 50 percent hike in profits sounds impressive, it is starting from quite a low base. ZTE had a relatively poor 2006, managing just 767 million Yuan Renminbi (US$107 million) in net income from revenues of RMB23 billion ($3.2 billion). (See ZTE Profits Fall 40 Percent.)

A 50 percent rise in profits would take it to RMB1.15 billion ($160 million), while a 70 percent increase would push 2007 net income to RMB1.3 billion ($181 million).

The company did not provide guidance for its expected full-year revenues, but it had already matched its full-year 2006 revenues in the first nine months of 2007, so it's in line for reasonable annual sales growth. (See ZTE Reports Q3.)

— Ray Le Maistre, International News Editor, Light Reading