Lucent's payout lifts earnings at VTech
Profits at VTech Holdings increased 15-fold in the six months to September 30, helped largely by the settlement of a lawsuit with Lucent Technologies.
The maker of cordless phones and electronic-learning products yesterday said that net profits soared to US$50.1 million. The company earned US$3.3 million in the same period last year.
The huge increase was due mostly to a one-time gain of US$34 million from an out-of-court settlement with Lucent.
VTech had sued Lucent, claiming the American phone-equipment maker overstated the value of inventory at a mobile phone unit it sold to the Hong Kong company in 2000. VTech had borrowed heavily at a high interest rate to fund the acquisition.
VTech's debt tab climbed to US$95.8 million as of March 31 this year. But debt fell to US$14.1 million by September 30 as the company used its windfall and profits to pay down loans, bringing the company back to a net cash position for the first time since last year.
In addition, the surge in profit came off a lower comparison base in the same period last year, when VTech booked a restructuring charge of US$9.9 million.
VTech's gross profit slipped to US$151.7 million from US$158 million a year earlier.
Turnover fell 11.5 per cent year on year to US$468.7 million from US$529.6 million.
Revenue was hurt by the loss of a major client in the telecoms products market. Also, the company has lost market share to rival Leapfrog in the United States in the electronic-learning products sector.
VTech chairman Allan Wong Chi-yan said his company would launch 10 new electronic-learning products in its debut in the mainland and would seek to boost mobile phone sales in Europe, aiming for a 10 per cent share of the market there in three years.