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Basic phones burn hole in TCL Communication Technology's profit

Revenue rises but lower margins on firm's main line send results into a tailspin

PUBLISHED : Saturday, 27 October, 2012, 12:00am
UPDATED : Saturday, 27 October, 2012, 3:24am

Net profit for mobile-phone maker TCL Communication Technology was almost wiped out in the first nine months, even as its revenue rose 9 per cent.

TCL said net profit plunged 99 per cent to HK$9 million in the period, down from HK$606 million a year ago.

The company blamed the steep drop on lower margins from its main range of "feature phones", or basic mobile phones.

TCL is migrating its product lines from these basic phones to smartphones.

"In the past nine months, both the sales volume and profit margin of feature phones have dropped. At the same time, we have increased our research and development expenses in smartphones," the company said.

Chief executive Guo Aiping said competition in the smartphone market was fierce but "we will maintain competitive strength by continuing to invest in research and shortening product cycles".

TCL total handset sales volume fell 4 per cent year on year in the first nine months to 29.2 million units. On the mainland, however, sales rose 48 per cent to 4.4 million units.

Revenue rose to HK$8.1 billion and the average price of handsets rose to US$35.80 from US$31.40 in the first nine months from a year ago.

Sales of smartphones, which have higher margins, went up fivefold to 4.2 million units, making up 14 per cent of total shipments.

"We will continue to optimise product portfolio and increase the proportion of smartphones [in the product mix]," Guo said.

Meanwhile, television maker TCL Multimedia Technology, a sister company, reported net profit rose 62.4 per cent to HK$635 million in the first nine months as revenue increased 21 per cent to HK$27.2 billion.

TCL Multimedia, one of the mainland's biggest television manufacturers, said the average price of its products dropped 10.5 per cent in the first three quarters.

Television prices overall fell 15 per cent in the period, but the company stressed that the fall did not affect its profitability.

TCL Multimedia said it improved its sales network this year, increasing sales outlets to 27,500 from 26,000 at the end of last year.

"The improved sales network will strengthen our position," the company said.

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