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Optical/IP

ZTE Doubles Revenues

China's ZTE Corp. today announced financial figures for 2003 that indicate it's growing just as fast as its main rival, Huawei Technologies Co. Ltd. (see ZTE Reports 2003 Earnings).

ZTE won overseas contracts worth $605 million in 2003, double its 2002 achievement, according to the company. This puts it about one year behind Huawei, which says that it won overseas contracts worth $1.05 billion in 2003, compared to $552 million in 2002.

Overall, ZTE's 2003 revenues totaled 15.036 billion Renminbi (US$1.9 billion), a 45.66 percent increase on the previous year, according to the company. Huawei's revenues totaled $3.2 billion in 2003 and $2.1 billion in 2002. (Note that the $3.8 billion often cited as Huawei's 2003 revenues is the value of contracts booked, not the amount that Huawei billed its customers.)

Table 1: Value of International Contracts Won, in $ Millions
2000 2001 2002 2003
Huawei 128 328 552 1,050
ZTE N/A N/A 302 605
Source: Huawei and ZTE
ZTE says it can't provide data on international sales prior to 2002


Table 2: Overall Revenues, in $ Billions
2000 2001 2002 2003
Huawei 1.9 2.3 2.1 3.2
ZTE 0.6 1.1 1.3 1.9


It's worth noting that ZTE and Huawei scored these growth rates while the revenues of some big Western equipment vendors shrank almost as fast. Alcatel SA (NYSE: ALA; Paris: CGEP:PA), for instance, saw its overall revenues slide from $20.2 billion in 2002 to $15.3 billion in 2003, and Lucent Technologies Inc. (NYSE: LU) saw its revenues slump from $12.3 billion to $8.5 billion over the same period.

It's also worth noting that ZTE and Huawei say they're making healthy profits while they're growing. ZTE says net profits totalled RMB752 million in 2003 ($90.8 million), a 32.72 percent increase on the previous year, according to today's press release.

On the international front, most of ZTE's contracts have been won in emerging countries in the Asia/Pacific, Latin America, and Eastern Europe. It has won a few contracts in Western Europe -- notably for DSL equipment for the Olympic Games in Athens -- but it hasn't made the sort of breakthroughs that Huawei apears to be making with the big incumbent carriers (see Huawei Gets BT's Blessing and Huawei Helps BT Launch Video).

ZTE has had a presence in the U.K. for two years, according to Eric Guanyan, the company's chief representative in the U.K. For most of 2003, ZTE focused nearly all of its efforts on having its DSL equipment evaluated by BT Group plc (NYSE: BTY; London: BTA). Guanyan says ZTE ended up being ranked fourth out of 30 vendors and not winning any work.

ZTE has now shifted strategy in Western Europe, according to Guanyan. It's broadened its focus to target prospects such as Vodafone Group plc (NYSE: VOD), NTL Inc. (Nasdaq Europe: NTLI), Cable & Wireless plc (NYSE: CWP), and other Tier 2 players.

"We believe the future revenue driver is going to be wireless," says Guanyan, noting that ZTE has a 3G R&D lab in Sweden and is "actively in talks with a number of [Western] equipment vendors about possible collaboration." ZTE and Nokia Corp. (NYSE: NOK) already sell some of each other's products, he adds.

— Peter Heywood, Founding Editor, Light Reading

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