ZTE predicts $178 million first-half profit after boosting R&D spending for 5G development

ZTE Corp, one of the leading telecom equipment manufacturer, believes that it will be able to turnaround its business this year and a profit of about 1.2 billion yuan ($178 million) and 1.8 billion yuan in the first half is predicted.

This news is significant considering that ZTE Corp recorded a loss of 7.8 billion Yuan in the same six-month period last year. This development happens after ZTE Corp has made continuous efforts to improve after a disaster in 2018.

In June 2018, the company reached an agreement with the US Department of Commerce to pay about $1 billion in fines and also pay an additional $400 million as surety. This was part of the company’s settlement for violating US prohibitions against selling American equipment to Iran.

The agreement also required ZTE to replace its board and terminate all executives ranked above senior vice-president. Anyone involved in the Iran violations was to be terminated as well.

As a result of the company being banned from doing business in the US and with the companies based in the US, all major operating activities had to be ceased for about four months. However, this resulted in increased focus in the R&D for 5G technology.

In terms of financials, ZTE had a net profit of 863 million Yuan between January and March compared with a 5.4 billion yuan loss in the same period last year. The company had first-quarter revenue of 22.2 billion Yuan which is 19.3 percent less than its first-quarter revenue for last year.

The company recorded its Research & Development costs for the first-quarter to be 3.1 billion Yuan. This accounts for 13.9 percent of revenue, up compared to a ratio of 9.8 percent for the same period last year.

A few months ago, at the Mobile World Congress in Barcelona, ZTE announced that it had secured six commercial 5G contracts. This was on top of large supply deals which it had made with China Mobile, China Unicom, and China Telecom.

Source

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