ZTE Sales Down, Profits Up on Cost Cutting

Despite falling sales, ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) continues to forecast profits. The Chinese vendor said today that its net income for the first nine months of 2013 will be between RMB 500 million ($81.6 million) and RMB 750 million ($122.4 million). It recorded a net loss for the same period in 2012. (See: ZTE Suffers Sales Slip in First Half.)

ZTE also announced its results for the first half of 2013, which included an 11.9 percent revenue dip to RMB 37.58 billion ($6.1 billion) and a 26.6 percent jump in profit to RMB 310 million ($50.6 million). The vendor continues to use cost-control efforts launched late last year to boost its numbers, trimming costs related to sales, administration, and research. It also recorded gains from the sale of a subsidiary. (See: ZTE Reports Losses, Plans Closures.)

ZTE blamed the revenue drop on falling sales of GSM and UMTS products in China and declining demand for 2G devices. For the rest of 2013, it is expecting more carrier spending on 4G TD-LTE network construction in China.

While awaiting the 4G windfall, the vendor also claims to be pressing forward with technology innovation, despite tightening its research and development costs. Evidence supporting that claim can be seen on the wireline side, where ZTE has been quicker than some vendors to offer 400G capabilities, even though that technology may not be a real factor in carrier networks for at least a few years. (See: ZTE Boasts 400G Breakthrough.)

— Dan O'Shea, Managing Editor, Light Reading

Gabriel Brown 8/22/2013 | 1:52:00 PM
Re: Waiting for 4G DiGiTimes reported what it thinks are the winners of the China Mobile TD-LTE tender: http://bit.ly/1avk2cE
R Clark 8/22/2013 | 2:27:36 AM
Waiting for 4G This is one company really hanging out for China 4G  rollouts. Carrier network sales have been basicallly flat for three years running.

On the handset side, it says sales have fallen because of decline in feature phone in favour of smartphones. OK - but its handset margin has also fallen by 1.3 percentage points. 

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