ZTE Corp, China's second-biggest maker of phone equipment, said full-year profit fell 37 percent, missing analysts' estimates, as research and marketing costs surged.

Net income fell to 2.06 billion yuan (US$327 million), from a restated 3.25 billion yuan a year earlier, the company said in a statement to the Hong Kong stock exchange yesterday. That missed the 2.78 billion yuan average of 10 analysts' estimates compiled by Bloomberg News.

ZTE raised spending and offered discounts to boost sales of mobile phones to compete with rivals including Huawei Technologies Co. ZTE's shipments of smartphones surged fivefold to over 12 million units last year, the company said in January.

"Handset revenues should continue to grow driven by strong smartphone sales," Alan Hellawell, a Hong Kong-based analyst at Deutsche Bank AG who rates the shares buy, wrote in a report yesterday. China's interest rate increases last year also pushed up ZTE's borrowing costs, he wrote.

Research and development costs rose to 8.5 billion yuan from 7.1 billion yuan a year earlier, ZTE said.

Source:shanghaidaily