Devices Drive ZTE in Q1Devices Drive ZTE in Q1

ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) device sales rose 51 percent in the first quarter of 2011, driven by growth in 3G handset sales outside China. (See ZTE Reports Q1 .)

The equipment maker's carrier networks division grew, too, by about 2 percent over last year, though its telecom software systems business saw a slight decline in sales.

The company said that it stepped up its research and development efforts into new products and technology in the quarter and is continuing to explore new market opportunities.

Overall, for the quarter ending March 31, ZTE posted a net profit of CNY127.3 million (US$19.4 million), a 16 percent increase over the previous year. Operating revenue grew 13.8 percent to CNY15.1 billion ($2.3 billion).

Why this matters
ZTE is quickly sharpening its focus on Western markets, targeting first-time smartphone owners with low-cost Android devices. The company says it will keep its Western momentum going by exploiting opportunities in increased broadband penetration, wireless network equipment upgrades and global demand for smart terminals.

The way ZTE's growth has been achieved in Western markets, however, has upset some of its competitors. Like Chinese rival Huawei Technologies Co. Ltd. , it has battled security concerns abroad, as well as its fair share of lawsuits. The company provided an update on its ongoing legal battle with Ericsson AB (Nasdaq: ERIC) over patent infringement, noting that litigation currently taking place in the U.K., Germany and Italy did not have an effect on financials for the period. (See Ericsson Sues ZTE Over IPR Theft.)

For more
A focus on 3G and smartphones has driven ZTE's handset growth in 2011. Here's more on its success in China and elsewhere.