ZTE Corporation Reports First Ever Loss as a Public Company

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ZTE Corporation (SHE:000063), the Chinese telecom equipment giant, swung to a third-quarter net loss of 1.9 billion Yuan (US$312 million). The company reported its first ever quarterly loss as a public company. The company has been selling assets in order to strengthen its capital base, and trimming the salaries of employees almost by half.

ZTE Corporation Reports First Ever Loss as a Public Company

The equipment giant blamed the depressed global economy, operational bottlenecks, declining spending on telecom in China as well as internationally, as major factors impacting the results. The other main reason given was the dependence on low margin products in China, Asia and Europe.

On November 16th, the company announced the sale of an 81 percent stake in its Chang Fei Investment subsidiary. Through this, the company expected to net between 450 and 850 million yuan (US$72-$136 million), which will revive the capital base of the company, as well as help it to support its core business.  However, selling of assets has not been able to offset its hefty losses. ZTE’s net profit declined during the third quarter by 250 percent (year on year basis). The signs of ZTE Corporation (SHE:000063)’s deteriorating financial health was displayed, when just before announcing its third Quarter results, company laid off 30 percent of its workforce at its Changsha branch.

In sharp contrast to ZTE Corporation (SHE:000063), competitor Samsung Electronics Co., Ltd. (LON:BC94) dazzled investors with record quarterly operating profit attributed to its sales of flagship smartphones. The Korean firm’s operating profit was up by 18 percent. The net profit recorded was $5.9 billion and sales came in at $ 47.6 billion, a 26 percent increase. ZTE although wants to move up the smart phone range, but remains way behind when compared to the big players, such as  Samsung Electronics Co., Ltd. (LON:BC94) and Apple. Another close rival, Cisco Systems, Inc. (NASDAQ:CSCO), a leader in networking, reported Q3 net sales of $ 11.6 billion, an increase of 7 percent year on year. Net income reported by the company was $2.2 billion, an increase of 20 percent year on year. However, HTC Corp (TPE:2498) one of the leading rivals of ZTE Corporation (SHE:000063) did not do so well in the third Quarter, posting an almost 50 percent loss, compared to the previous quarter. Net profit reported by the company was $137 million.

ZTE Corporation (SHE:000063) earnings likely indicate that, in the coming next quarter, it will focus its attention towards development of mainstream products and solutions, develop and optimize its strategies for the populous nations (such as China), and also develop its strategies and markets for government and corporate agencies.

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