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Qiao Xing Mobile Q2 Revenues Down 54%

Qiao Xing Mobile Press Release, 9/12/08

Chinese mobile handset vendor Qiao Xing Mobile Communication (NYSE: QXM), which operates primarily through subsidiary CEC Telecom ("CECT"), today announced its unaudited second quarter operating results for the three months ended June 30, 2008.

Revenues for Q2 2008 were RMB 383.7 mln (USD 55.9 mln), down 54.5% period-on-period and down 36.5% quarter-on-quarter.

Handset shipments reached approximately 566,000 units, down 46.4% period-on-period and down 33.1% from the first quarter of 2008.

Gross margin was 34.7%, compared to 33.5% in Q2 2007 and 31.4% in Q1 2008.

Operating income was RMB 76.1 mln (USD 11.1 mln), down 67.0% period-on-period and down 49.9% from the previous quarter.

David Li, the company's CEO, attributed the negative growth to the impact of the earthquake that took place in Sichuan province in May, and subsequent slow-down in consumption in the Chinese consumer market. He added that a delay in the release of a new product, the VEVA S60, also contributed to the Q2 decline in sales.

The average sales price (ASP) of the company's handset products decreased to RMB 663 (USD 97) in Q2 2008, as compared to RMB 795 and RMB 707 in Q2 2007 and Q1 2008, respectively. The company attributed the sequential drop in ASP primarily to price erosions on old handset models, such as W100, C3100 and T150 in Q2 2008, and the year-over-year decline in ASP mainly to the sales of a higher volume of low-end phones, such as C3100, in Q2 2008.

The company believes the launch of its first model of VEVA brand handsets, VEVA S60, will help fuel stronger growth in the latter half of the year. In Q2 2008 it shipped 100,000 units of the VEVA S60 - which currently retails for RMB 1,980 (USD 289) with a gross margin of approximately 61%, and in Q3 it hopes to sell another 300,000 units. Qiao Xing Mobile also plans to enter the CDMA market through the launch of two CDMA models later this year, chipsets for which it will source through a strategic cooperation with Taiwan-listed VIA Technologies. CECT and VIA will also work together towards the bundling of the CDMA mobile phones with China Telecom.

Keywords: revenue profit sales volume David Li fiscal report CDMA CECT earthquake Q2 2008 Qiao Xing QXM VEVA S60 Via Technologies wireless mobile phone pricing

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