China's ZTE is said to be cutting about 3,000 jobs, including about one fifth of the positions at its Chinese handset business, according to company sources cited by Reuters.
The job cuts would reduce overall staff numbers to about 57,000 and leave the global handset business with about 5,400 employees by the end of March, down from 6,000 today.
Cuts at the handset operation will be concentrated in China, according to the Reuters report. "Cuts in the handset business in China will be beyond 20%," said an unnamed senior executive cited in the story.
While ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) has not officially confirmed the plans, the move would be further evidence that it faces difficulties in both network and handset markets.
In a New Year's message, ZTE chairman Zhao Zianming is reported to have told staff that ZTE has "encountered its biggest crisis in its 31-year history," promising to shut down a number of underperforming divisions this year.
Unlike Western network rivals Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK), ZTE managed to grow its business over the first nine months of 2016. But its recent financial performance pales next to that of bigger Chinese rival Huawei, against which ZTE competes in both network and handset markets. (See ZTE Grows Sales as Western Rivals Struggle.)
ZTE's sales were up 4.4% in the first nine months of 2016, to 71.6 billion Chinese yuan ($10.3 billion, at today's exchange rate), compared with the year-earlier period, while Huawei has recently estimated that its own revenues grew by as much as 32% in 2016, to about RMB520 billion ($75.1 billion). (See Huawei's Network Sales Up Around 32% in 2016.)
Even Huawei Technologies Co. Ltd. has warned about "political and economic uncertainties" this year, however, with Rotating CEO Eric Xu complaining about the lack of improvement in its operating efficiency and cash flow.
All of the leading equipment vendors are concerned about the weak spending environment following a wave of investment in 4G networks over the past few years.
The hope is that the emerging 5G standard will persuade telcos to loosen the purse strings once again, but this technology is still at least three years away from commercial deployment.
— Iain Morris, , News Editor, Light Reading