ZTE's Third Quarter Report Pre-Lossed 1.75 Billion Management Apologize for Collective Salary Reduction

The first and third quarterly report of a loss of 1.75 billion analysts said that if the company fails to meet expectations in the capital market several times in recent years, it is easy for investors to feel frustrated.

The three quarterly advance notice issued by ZTE led the market to lose sight. In the third quarter of 2012, ZTE did not reverse its declining performance in the first half of the year. Instead, it suffered a huge loss in the first three quarters of its earnings. ZTE's management apologized for the current operating results and decided to pay them collectively.

In the second and third quarter, the company reported huge losses, and analysts shouted unexpectedly that according to the announcement, ZTE expects the net profit attributable to shareholders of listed companies in the third quarter to be 1.9 billion to 2 billion yuan, a sharp drop of 734.89% to 768.3% year-on-year. The sharp losses in the third quarter led directly to a loss of 1.65 billion to 1.75 billion yuan in the three quarterly report of ZTE, which fell by 254.42% to 263.78% year-on-year.

The company explained that operating income from July to September 2012 decreased by approximately 13% from the same period of last year, which was mainly due to the delay in the progress of some international project projects and the combined effect of the domestic operator's collective procurement model on the company’s revenue recognition; 7-9, 2012 The company's overall gross profit margin decreased by approximately 13 percentage points from the same period of last year, which was mainly due to the fact that many low gross margin contracts in Europe, Asia, and China were confirmed during the reporting period. Affected by this, the company's operating income increased from January to September 2012 compared with the same period of last year, but the overall gross profit margin decreased compared with the same period of last year.

ZTE also stated that as the U.S. Department of Commerce and the U.S. Department of Justice are investigating ZTE's and its subsidiary's transactions with Iran, the company is cooperating with the investigation and the Iranian market has adversely affected the company's operating performance during the reporting period.

Previously, ZTE was suspected of being suspected of exporting Iranian computer products to the United States and was investigated by the U.S. Department of Commerce and other departments. For this reason, Cisco recently terminated its contract with ZTE.

Responsible person of ZTE told reporters that due to the weakening of the global economy, investment from overseas operators has slowed down. In addition, past low gross margin contracts were confirmed in the quarter, and gross profit in the third quarter decreased significantly compared with the same period last year. The African region with higher gross margins in history has been transitioning from old to new projects since the beginning of the year, with fewer new contracts.

Third, try to defeat the strategic adjustment of Zhongxing, will be profit-centered For ZTE this huge loss, there are communications industry analysts to the "Securities Daily" reporter expressly surprised, see ZTE's three quarterly advance notice, the analyst said "I'm not even depressed, I don't know what to say."

In fact, if the sale income of Zhongxing Special has been confirmed to be 365 million yuan, ZTE's huge loss of more than 2 billion yuan in the first three quarters of 2012.

“The situation outside is really bad, and other international equipment manufacturers are also doing poorly. However, as a late-start equipment supplier, it has a cost and price advantage. It should not be such a situation.”

“I think ZTE may think about strategically in the future,” said Ma Jun, Chief Analyst of China Treasury Securities TMT, to the Securities Daily reporter.

After paying a loss for the scale expansion strategy, ZTE seems to be aware of the company's strategic problems.

ZTE’s management stated that in the fourth quarter, the company will first improve its sensitivity to internal and external situations and make strategic adjustments in a timely manner. Secondly, the company will focus on profits and make every effort to improve the profitability of orders. At the same time, the company will reduce losses and turn losses around for a limited period of time in response to past losses. Third, there is still room for improvement in the company's sales expenses and R&D expenses. Fourth, the company will abolish the representative offices that have suffered long-term losses and cannot turn losses in the short term. The company will integrate products with low input-output efficiency and no potential for growth, and the company will control the number of employees and make structural adjustments.

Responsible person of ZTE told reporters that the company will re-examine regional and product strategic layout, increase terminal investment in Europe and the United States market, and actively seize opportunities for wireless and cable broadband in emerging markets such as China and Asia-Pacific. Specific to the LTE field, the state stated that it will speed up the issuance of 4G licenses and network construction. The relevant ministries and commissions are reviewing and formulating spectrum allocation plans. The implementation of the roadmap will be gradually clear. ZTE will pay close attention to the progress and active participation.

Ma Jun believes that ZTE must first analyze the future of strategic decision making clearly, look at its own situation, and work harder on leadership and execution. In the future, opportunities may arise, including opportunities such as LTE, or even if there is an opportunity. It may not be able to grasp it all.

Ma Jun also stated that if the company fails to meet expectations several times in recent years in the capital market, it is very easy for investors to feel frustrated and not easily approached. The company will only use actual performance actions to speak in the future. Turn the point of view.

In the face of the current grim situation, ZTE's management stated that the current pressure and challenges are enormous, but the company is confident to lead all staff to adjust their strategies in a timely manner, grasp market opportunities, reduce costs, improve operational efficiency, and turn losses into profits as soon as possible.