ZTE posts 36.6% slump in 2011 profit

Dylan Bushell-Embling
29 Mar 2012

China's ZTE has reported a 36.6% decline in 2011 net profit to 2.06 billion yuan ($326.8 million), as heavy R&D and marketing spending outweighed strong gains in revenue.

The Chinese vendor revealed it lifted its revenue for the year by 23.4% to 86.25 billion yuan.

Operating revenue from international markets increased by 24% from the prior year, and accounted for 54.2% of ZTE's total operating revenue for 2011.

The company said it had secured some 30 commercial LTE contracts and participated in commercial LTE trials being conducted by around 100 operators during the year.

Yet R&D expenses climbed to 8.5 billion yuan for the year, up from 7.1 billion yuan in 2010, and sales and distribution costs grew by nearly a quarter to 11.1 billion yuan.

The resulting decline in profit was sharper than observers had been anticipating. Financial analysts polled by Bloomberg had on average expected ZTE to report a 2.78 billion yuan profit for the year. This would have been a 14.4% decrease.

But the heavy spending is showing signs of paying off. In the smartphone segment, Gartner has estimated that ZTE was the world's second fastest-growing smartphone vendor during the year, and the fourth largest manufacturer by shipments.

ZTE also filed the most patent cooperation treaty patents of any company in 2011, with around 60% of these related to smart terminals and new networking technologies.

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