China Techfaith's Earnings Drop 75%

The company posted a net profit for fiscal 2008, but lower gross margins contributed to plunging fourth quarter earnings.
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On March 9, 2009,

China Techfaith Wireless Communication Technology Ltd.


reported that its Q4 FY08 earnings dropped 74.5%, hurt by an $880,000 impairment charge on long-lived assets and lower gross margins. Net income for the latest fourth quarter fell to $824,000 or $0.02 per American Depository Share (ADS) from $3.23 million or $0.07 per ADS in Q4 FY07.

Revenue increased 13.5% to $51.86 million from $45.69 million a year ago. Revenue from product sales increased 15.5% to $44.69 million from $38.70 million, while design fees rose 22.6% to $6.52 million from $5.31 million. On the flip side, royalty income decreased 82.9% to $181,000 from $1.06 million, while component sales slipped 20.6% to $465,000 from $586,000 in the prior year's quarter. Of the total component and product sales, smart phones revenue climbed 48.3% to $25.48 million, while feature phone sales slipped 11.2% to $17.88 million. Similarly, revenue from the wireless module and other component sales slipped 3.8% and 17.7% to $1.32 million and $465,000, respectively.

Recently, China Techfaith entered into an agreement with QIGI, a Chinese smartphone brand, to launch four new smartphones for China Telecom and China Unicom customers in Q2 FY09. The company also announced the launch of nine new mobile phones designed specifically for the third-generation (3G) network in China along with Aigo, a brand in consumer digital products marketed in China.

During FY08, China Techfaith reported net profit of $8.00 million or $0.18 per ADS compared to net loss of $3.27 million or $0.08 per ADS in Q4 FY08. Annual revenue surged 45.6% to $208.85 million from $143.44 million a year ago.

Looking forward, the company expects its Q1 FY09 revenue to be in the range of $45.00 million to $49.00 million.