ZTE (0763.HKG, 000063.SZ), a Chinese telecoms equipment supplier, saw its share price decline 16% on Monday after announcing that the company expects its profits to drop between 60% and 80% in the first half of 2012, The Wall Street Journal reported. ZTE said that the drop was due to a number of factors, including exchange rate losses and contract delays, and added that it expects profits to pick up again in the second half of the year. Analysts disagreed, though, whether ZTE’s slump was a one-off event. Jasmine Lu, an analyst at Morgan Stanley, said ZTE remains a good investment, particularly at the current low price. But others see signs of ZTE underperforming in the long-term. CK Cheng, an analyst at CSLA, doubted that ZTE would continue to increase its market share in an increasingly consolidated industry. Others questioned whether ZTE’s strategy to move into the highly competitive smartphone market would improve the company’s profits.
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