ZTE Pumps Up Sales

Chinese vendor sees Q1 sales increase by 44%, but profit margins are still small

April 25, 2008

2 Min Read
ZTE Pumps Up Sales

ZTE has reported a nearly 44 percent increase in revenues for the first quarter of this year, though the company is struggling to generate sizeable profits from its significant sales.

In a document filed with the Hong Kong Stock Exchange, ZTE reported first quarter revenues of 8.6 billion Yuan Renminbi ($1.24 billion), up 43.8 percent from a year earlier. But high costs associated with sales and distribution, on top of its R&D expenses, left it with a first quarter net profit of just RMB60.9 million ($8.7 million).

ZTE's share price closed Friday at HK$31.40, down nearly 5 percent.

The majority of the vendor's sales growth came from wireless infrastructure sales (GSM and CDMA), which, according to ZTE, grew by 113.8 percent compared with a year earlier. (See ZTE Touts CDMA Strengths and ZTE Ousts NSN in Hong Kong .)

Sales of voice switches and access products increased by 25.5 percent, while sales of optical and data products grew by 39.9 percent year-on-year. (See ZTE Wins in Kenya and ZTE Wins WDM Deal.)

Mobile device sales were up just 1.3 percent, with revenues from GSM and 3G handsets providing the growth. Revenues from telecom software (OSS, IMS), and services increased by 17.4 percent, said ZTE. (See ZTE Aims to Boost IMS.)

The company noted that the Chinese market developed "at a slower pace" in the quarter, while there was "significant growth in mobile voice communication services in emerging markets such asAsia [excluding China] and Africa," with developed markets "more focused on mobile data communications services." (See ZTE Sets Indian Target and ZTE Bullish on Emerging Markets.)

ZTE said it had "made strong efforts to expand its presence in key overseas market and enhanced cooperation with global mainstream carriers in emerging markets to sustain stable development for its international business segment." (See ZTE, Vodafone Get Closer.)

Like its Chinese counterpart Huawei Technologies Co. Ltd. , ZTE is keen to grow its business outside China as much as possible. (See Huawei Sets Bumper Sales Target.)

While the company didn't break out its international revenues for the first quarter, its annual report for 2007 shows that ZTE's international revenues for the year nearly doubled year-on-year to RMB20 billion ($2.85 billion), accounting for nearly 58 percent of the vendor's total 2007 sales of RMB34.8 billion ($5 billion). (See ZTE Reports 2007 and ZTE Touts 2007 Profit Hike .)

— Ray Le Maistre, International News Editor, Light Reading

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