Despite higher revenue overall for the first nine months of 2012, ZTE reported a preliminary loss of between RMB1.65 billion and RMB1.75 billion, a reversal of between 254.42% and 263.78% compared to the same period of a year earlier.
For the most recent quarter (ended 30 September 2012), ZTE’s revenue decreased by approximately 13% as compared to same period last year.
ZTE apologized to shareholders for the poor results and cited four factors for its weaker performance:
(1) the current global economic and industry trends,
(2) the recognition of low-margin contracts in the third quarter,
(3) a delay in some projects of overseas clients, and
(4) a change in the procurement mode of domestic operators.
In China, ZTE was hit by, a change in the operators’ procurement mode and the timing of their investments.
In the international market, ZTE said operators slowed down their pace of investments because of a weakening global economy. ZTE’s gross profit decreased significantly due to the recognition of some lower-margin contracts. In Africa, where the company was previously able to achieve higher-margin business, the overall market was undergoing a transitional stage, resulting in fewer new contracts.
ZTE also acknowledged that its results were adversely affected by operations in Iran. The company noted that these operations are being investigated by the U.S. Department of Justice and U.S. Department of Commerce.
The company outlined several steps to address these problems:
- ZTE’s management has agreed to cut their own compensation collectively.
- ZTE will raise its level of responsiveness to the internal and external environment
- ZTE will conduct a review of its product portfolio and of its regional operations
- ZTE will put profit at the center of its focus and be committed to increasing the profitability of contracts and reducing the losses of unprofitable businesses.
- ZTE will reduce its selling costs and research and development expenses.
- ZTE will eliminate offices that record losses for a long time and which have limited prospects of a turnaround.
- ZTE will consolidate products that offer little development potential,
- ZTE will exercise headcount control and conduct organizational change.
ZTE’s strategy calls for more resources on its terminals business in North America and Europe. The company will proactively pursue opportunities in the wireless and wired broadband segments in emerging markets including China and Asia Pacific.
- In April 2012, ZTE reported operating revenue of US$2.96 billion fo rQ1 2012, an increase of 29.46% over the same period last year. Net profit attributable to shareholders was US$22.99 million, an increase of 23.85% over the same period last year. Basic earnings per share were US$0.00635.
- For the first 9 months of 2011, ZTE claimed a 33.4 per cent increase in sales revenue year-on-year to US$9.17 billion in the first nine months of 2011, earning it the claim of “the fastest growing major network equipment supplier.” Average revenue growth for the industry during the first three quarters of 2011 was approximately 10 percent, according to the company.
