ZTE Corp shares dropped 5.81 per cent yesterday, with market watchers citing profit taking but others pointing to a steep drop in gross profit margins at the Shenzhen company's handset business. The mainland technology firm yesterday reported a 23.8 per cent rise in full-year earnings to 1.27 billion yuan. Turnover climbed 24.6 per cent to 21.22 billion yuan, helped by sales in emerging markets. But according to Kenny Tang Sing-hing, an associate director of research at Tung Tai Securities, the good numbers masked a worrying trend in the company's handset division, which accounts for 28.4 per cent of turnover. Gross profit margin for the business dropped six percentage points to 12.1 per cent - raising fears prices for mobile phones were dropping faster than expected. In the optical and data communications business - which accounted for 11 per cent of sales - gross profit margin fell 12.7 percentage points to 24.3 per cent. ZTE closed $1.50 lower at $24.30, still 10.45 per cent higher than its December listing price but off highs of $29 reached earlier this year. The bright spot for ZTE has been international sales, which climbed 133.5 per cent to 4.57 billion yuan, about 21.5 per cent of turnover. Growth has been helped by sales to price-conscious carriers such as GEP Telecom in Bangladesh - a customer segment many western players often ignore. The mainland accounted for 78.5 per cent of turnover, with 11.6 per cent coming from other Asian customers and 7.1 per cent from Africa. ZTE has earmarked 60 per cent of the $1.57 billion raised in its December share sale for international expansion. It hopes overseas revenues will contribute 40 per cent of sales by next year.