China's ZTE Corp sees first-half profit down 60-80 percent

SHANGHAI Fri Jul 13, 2012 4:44pm IST

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SHANGHAI (Reuters) - ZTE Corp, China's second-largest telecoms equipment maker, warned its first-half profit could drop as much as 80 percent due to lower gross margins, foreign currency exchange losses and domestic operator networks postponing their tenders.

The profit warning comes as a report emerged that the FBI has opened a criminal investigation into the Shenzhen-based company over the sale of banned U.S. computer equipment to Iran and its alleged attempts to cover it up and obstruct a Department of Commerce probe.

A fall in the euro and many emerging currencies due to the debt crisis caused the ZTE to take a foreign exchange loss, compared to a gain in the same period a year ago, it said.

The postponement of the network tenders also meant ZTE, the world's fourth-largest mobile device maker with 4.2 percent global market share in the first quarter, missed its revenue growth target for the period, the firm said.

A slew of Chinese companies, including China Eastern Airlines, China Southern Airlines Co Ltd and Li Ning Co Ltd, have recently issued profit warnings illustrating the impact the global slowdown on the world's second biggest economy.

(Reporting by Melanie Lee; Editing by Kazunori Takada and Mike Nesbit)

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