ZTE’s net profit plunged 36.6% in 2011, as heavy R&D and marketing spending outweighed strong gains in revenue.
The Chinese vendor’s profit fell to 2.06 billion yuan (€245 million), despite revenues growing 23.4% year-on-year, as R&D expenses climbed to 8.5 billion yuan from 7.1 billion yuan in 2010, and sales and distribution costs grew by nearly a quarter to 11.1 billion yuan.
Although observers had predicted a lower profit, the fall was higher than expected. 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.
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 secured 30 commercial LTE contracts and participated in LTE trials being conducted by around 100 operators.
But the heavy spending is showing signs of paying off.
Gartner estimates 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 treaties of any company in 2011, with around 60% of these related to smart terminals and new networking technologies.