Chinese equipment maker ZTE said it expects to report a loss for the first nine months of 2012, with its top management apologising and agreeing to cut their own pay.
The company attributed the weakness to “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”.
The Chinese vendor said that while revenue has increased year-on-year, it is “projected to record a net loss attributable to shareholders of between CNY1.65 billion and CNY1.75 billion [US$263 million to US$279 million], a reversal of between 254.42 percent and 263.78 percent compared to the same period a year earlier”.
The ZTE management said it will look to “raise its level of responsiveness to the internal and external environment in order to adjust its strategy in a timely fashion”. It will “put profit at the centre of its focus”, looking to improve the performance of contracts, and reduce losses on some unprofitable activities.
It also said it will look to cut selling costs and R&D expenses, and 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”.
In a statement, the company said it will allocate more resources to its devices business in North America and Europe, and pursue opportunities in the wireless and wired broadband segments in emerging markets including China and Asia Pacific.
In the LTE segment, it said that the path of development in China is becoming clear, “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”.
It was reported earlier this year that ZTE was looking to cut up to 12,000 jobs – a figure that was never confirmed by the company – as it saw weakness in the first half of 2012. It was suggested that it would look to close operations where its market share was on-the-slide.
ZTE has had a rough ride in the last week, following a report from the US House of Representatives which has questioned the company’s credentials for working in the US market – peer Huawei was also named.
It was also said that the EC has delayed an investigation into whether ZTE and Huawei received subsidies from the Chinese state which enabled them to undercut their international rivals – although none of the rivals has made an official allegation to this end.