ZTE's cost cutting to help it return to profitability in Q3

ZTE said it expects to charge back to a net profit for the first nine months of 2013, reversing a loss from the same period last year. The company said the improvements were due in large part to cost-cutting measures including reductions in administrative and R&D expenses.

ZTE, the world's No. 5 smartphone maker according to IDC, was hit last year by unprofitable network infrastructure contracts in markets such as Africa and slimmer margins in the smartphone market. In response, the company has sold stakes in non-core units, moved away from low-margin infrastructure contracts and has also imposed internal cost-cutting measures to help return to profit, Reuters noted.

In a statement to the Hong Kong stock exchange, ZTE said it expects a profit of $81 million to $121 million for the first nine months ending September, compared to a net loss of around $278 million in the same period in 2012. The means the company's third-quarter net profit would likely clock in at between $31 million and $72 million, compared to a $21 million net loss a year earlier, according to a Reuters calculation based on company data.

"The increase is primarily due to the reasons that the group has strengthened its management over contract profitability by strictly controlling the signing of low gross margin contracts," ZTE said.

ZTE also said that its net profit for the first half of 2013 rose 27 percent year-over-year to around $50.6 million, even though revenue fell 12 percent to $6.13 billion. The net profit figure is slightly higher than ZTE had forecasted in July.

According to ABI Research, ZTE was the overall No. 5 global handset maker in the second quarter. The company is hoping to push more high-end smartphones this year to Tier 1 carriers in the United States, but also needs to maintain its position on its home turf in China. The vendor is also banking on China's move toward TD-LTE network technology, especially though a massive upcoming tender from China Mobile, to help it boost infrastructure sales.

For more:
- see this Reuters article
- see this Dow Jones Newswires article
- see this ZDNet article

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