ZTE Corporation has announced its preliminary financial results for the first three quarters ended September 30, 2012.
Revenue for the first three quarters of 2012 increased from the same period of 2011, while the company is projected to record a net loss attributable to shareholders of between RMB1.65 billion and RMB1.75 billion, a reversal of between 254.42 per cent and 263.78 per cent compared to the same period of a year earlier. The loss is mainly attributed to four factors: the current global economic and industry trend, the recognition of low-margin contracts in the third quarter, a delay in some projects of overseas clients, and a change in the procurement mode of domestic operators.
In the domestic market, a change in the operators’ procurement mode affected the revenue recognition of the company. Simultaneously, the company’s revenue scale decreased significantly because of a change in the structure and cyclicality of investments by operators.
In the international market, overseas operators slowed down their pace of investments because of a weakening global economy. In addition, the company’s gross profit decreased significantly due to the recognition of some lower-margin contracts in the period. 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.
According to top management at ZTE, the company will first raise its level of responsiveness to the internal and external environment in order to adjust its strategy in a timely fashion. The company will put profit at the center of its focus, and be committed to increase the profitability of contracts, and reduce losses on some unprofitable business. The company will also optimise operational efficiency by reducing selling costs and research and development expenses. ZTE will eliminate offices that record loss for a long time with limited prospect of a turnaround, consolidate products that offer little development potential, exercise headcount control and conduct organisational change.
According to the top management at ZTE, the company will conduct a review of its strategy on products, and on operations in different regions. The company will allocate more resources to its terminals business in North America and Europe, while proactively pursuing opportunities in the wireless and wired broadband segments in emerging markets including China and Asia Pacific. In the LTE segment, the path of the development of the 4G industry in China is becoming clearer, with the government indicating it will accelerate the granting of 4G licenses and network construction, while relevant authorities are now reviewing and formulating the allocation of spectrum. ZTE will closely monitor this industry development, and seek to participate proactively.
