Chinese phone giant ZTE braced for loss in 2012

Plans to move into higher margin smartphones

China’s second biggest phone maker ZTE has warned it expects to post a loss for 2012, but should swing back into profit in this first quarter.
In its preliminary results announced yesterday [20th January 2013], ZTE revealed that its operating revenue for the fourth quarter of 2012 had dipped by about 18 per cent, compared to the same period in 2011. It now expects to register losses of up to 2.9 billion yuan ($439 million) for the 2012 financial year.
It attributed the decline to various things, including delayed international rollout and lower than expected domestic sales. Low margins on products in emerging economies such as Africa, South America and Asia were also blamed.
The company added that it now plans to rein in costs, streamline production and focus more on developed markets, in particular the US, Europe and Japan.
Just before Christmas, ZTE revealed how it would be turning its operation towards building more higher margin smartphones, taking its cue from rivals Apple and Samsung.
The company is also developing its own mobile operating system to avoid any of the patent clashes that bedevilled 2012.
According to IDC, Shenzhen-based ZTE – formerly known as the Zhongxing Telecommunication Equipment Corporation – is the world’s fifth biggest maker of smartphones having shipped more than 13 million devices in the first six months of 2012 alone.

* Apple is expected to report record quarterly sales later this week, though profits are likely to dip.
Though its iPhone and iPad are more popular than ever, margins – as with ZTE – are thought to have been squeezed by intense competition from rivals.

About Dave Evans

Dave Evans was a long established commentator on both the IT and cellular industries. His last focus was on share price trends within the sector. He passed away in September [2014].
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