China’s ZTE – the world’s fifth-largest telecoms equipment maker – has reported the steepest drop in net profits since the company went public six years ago.
It blames slowing telecoms infrastructure spending, handset price wars and recession in western markets.
ZTE’s net profits in the June quarter were down 85 per cent from a year earlier to Rmb94 million ($14.8m). Net earnings for the first half dropped 68 per cent to Rmb245 million, in line with a warning the company issued last month.
ZTE blamed delayed orders from telecoms operators and foreign exchange losses because of the euro crisis for the weak performance, but some analysts say the company faces much broader problems.
These are not ZTE’s only worries. The company, alongside Huawei, is being investigated in the EU for allegedly receiving unfair subsidies from the Chinese government. In the US, it is under investigation by the Department of Commerce and the FBI for allegedly selling equipment to Iran in violation of trade sanctions.