ZTE Suffers Sales Slump in Q1

ZTE Corp. put a cheery face on its financials late last week, announcing a first quarter net profit of 205 million Yuan Renminbi (US$33 million), a near 36 percent improvement compared with a year ago. (See ZTE Reports Q1 Profit of RMB205M.) But behind the scenes the company is still experiencing something of a rough patch. That first quarter profit was largely the result of an asset sale (a stake in Shenzhen ZNV Technology Co.) that took place in late December 2012 and which boosted the company's bottom line by RMB850 million ($138 million). Without that and other one-time gains, ZTE posted a loss of RMB615.5 million ($99.8 million) during the first three months of 2013 compared with a small profit last year. It also saw its revenues dip by 2.8 percent year-on-year to RMB18.1 billion ($2.93 billion). The company has had a tougher time in recent quarters and initiated a cost-cutting program during the second half of 2012 as its financial performance faltered. (See ZTE Reports Losses, Plans Closures.) In its quarterly report for investors, the company noted "slow growth in investments" by carriers in general, but provided little other commentary, other than to note that demand for smartphones is still increasing and that "large scale" LTE TDD investments are starting to ramp in its domestic market, which is generating demand for radio access and transport equipment. (See ZTE Boasts Smartphone Success.) That 4G action in China can't come soon enough for ZTE, as it is likely to deliver some significant business for both itself and Huawei Technologies Co. Ltd., as this Reuters article notes. (See China Mobile Seeks 4G Small-Cell Advantage and China Mobile's Capex Blowout.) — Ray Le Maistre, Editor-in-Chief, Light Reading