ZTE Posts Second Straight Net Loss Of $183M In Q4 On Emerging Market Woes

As it already warned, ZTE posted its second-straight quarterly loss, due to vastly trimmed margins in emerging markets, as well as contract delays and falling handset sales in China.

It made a net loss of 1.14 billion yuan ($183 million) in the three months ended Dec. 31, compared with its net income of 991.16 million yuan a year prior. Sales in the fourth quarter also fell 16 percent to 23.5 billion yuan ($3.78 billion).

In all, this makes it the first time ZTE has posted an annual loss, at 2.84 billion yuan ($456 million).

The company blamed the decrease in profit margin on low-margin contracts in emerging markets like Africa, South America and Asia, as well as its home market of China.

ZTE has spent the last 20 years aggressively expanding overseas, but often at the cost of profitability because of its slim profit margins as it undercuts European equipment makers in emerging markets such as India.

It recently said it will try to cut costs and make a profit in the first quarter by focusing on developed markets, instead.

ZTE has been lagging behind fellow Chinese rival, Huawei Technologies. The former recently announced it will increase its investment in 4G infrastructure, in order to catch up with Huawei, as the two compete for most 4G contracts from the three major carriers in China—China Mobile, China Unicom and China Telecom.

Huawei is the second largest global maker of telecoms equipment, while ZTE is fifth-largest.

As for its handset play, nobody is really staking a claim on the Android market the way Samsung is. According to Gartner’s latest report, Samsung has 42.5 percent of the global Android market, with the next vendor at just 6 percent. And it grew this share in just a year, eclipsing Taiwanese competitor HTC to leave it trailing by 30 percent at the end of 2012.

Across OSes, Samsung and Apple have the number one and two slot respectively atop the global share, at 29 percent and 21.8 percent, respectively, according to IDC. Huawei has 4.9 percent, Sony has 4.5 percent, and ZTE is fifth at 4.3 percent.

But ZTE has more to worry about than just the Samsung juggernaut. Its general focus on the low to mid-range Android handset market means that thinner and thinner margins make it less worthwhile to duke it out in emerging markets.

Its new plan to attack the high-end market is testament to that. The definition of a “smartphone” is changing to include a lot of lower end devices now, and isn’t just reserved for premium handsets anymore. And with about half a billion handsets this year to sell for less than $100, makers will have to sell an awful lot just to keep above the water.