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ZTE to report net loss due to third-quarter slump, share price drops

Nicole Lee, @nicole
10.16.12
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A week after the U.S. Congress slapped ZTE with a 'do not trust' allegation, the Chinese company gets another bitter dose of bad news. It's about to report a net loss of between 1.65 billion and 1.75 billion yuan (US $263 million to $279 million) for the first nine months of 2012, which pales in comparison to the 1 billion yuan profit it reported during the same period in 2011. This has resulted in a sharp 15.8 percent drop in ZTE's share price on the Hong Kong stock exchange, where it now sits at HK$10.56. The financial hit came exclusively in the third quarter (that's July through September), where revenues are reported to be 13 percent lower than the same period in 2011 -- 18.23 billion yuan ($2.9 billion) versus 20.95 billion yuan ($3.34 billion). The equipment vendor blames global trends, low-margin contracts, project delays and procurement changes for the downward turn, and hopes to implement some cost-cutting measures to ensure better margins. However, it says it won't stop its current deals in North America and Europe, and will continue to invest in China's LTE market. In an analyst call, executives said they hope to break even this year, and that it has cut its smartphone sales target from 26 to 28 million to around 25 million. Still, it doesn't look good for China's second-largest maker of phone equipment, and just when it was getting started in the Windows 8 arena, too.

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