Orsus Xelent Technologies, Inc. (NYSE Amex: ORS), a China-based
designer and manufacturer of award-winning mobile phones for the
Asian market, reported today that it was unable to sustain the
improvement in net income it achieved in the second quarter this
year, as anticipated 2009 third quarter orders for some of its
higher end products did not materialize, resulting in reduced sales
and margins in the period.
The Company reported 2009 third quarter revenues declined to
$19,125,000 from $29,240,000 in the quarter ended September 30,
2008, a 34.6% reduction, and net income declined 53.16% to
$1,370,000, or $0.05 per share, from $2,925,000, or $0.10 per share
in the same period last year.
Through the first nine months of 2009, net income slipped 8.44%
to $5,812,000, or $0.20 per share, from $6,348,000, or $0.21 per
share in the same period of 2008, as revenues through the first
nine months this year decreased 21% to $62,181,000 from $78,853,000
in the same period last year.
Lower End Products Continue To Dominate Sales
According to the Company, most sales in the third quarter were
to the highly competitive lower end of China's telecom market where
price wars and intense competition served to boost industry sales,
but left little room for introducing higher margin, high end
products. The Company said it remained competitive in this period
with continued good market reception in particular for its full
featured X780 handsets as well as the sale of some moderately high
end 3G products to the telecom operators.
"With everyone focused on maintaining their positions in the
very competitive rural markets where sales have been strongest,
disappointingly, opportunities for sales of higher end 3G products
have been limited and the impact on our margins and sales is very
evident," stated Mr. Guoji Liu, CEO of the Company.
Brighter Picture Likely to Emerge But Not Until 2010
He added, "We continue to anticipate a brightening in the
picture as the overall economy in China has started to recover from
the shock of the world financial crisis. However, the consumer
goods sector really has not seen direct benefits of government
expenditures on infrastructure, nor are we benefiting as yet from
the restructuring of the industry that has been taking place. While
this is more likely in 2010, for the current year we have had to
lower our expectations somewhat, and now believe both full year net
income and revenues will be slightly slower than in 2008."
Receivables
During the quarter, the Company said it was able to operate with
relatively low cash with rapid turnaround in its product cycle. At
the end of the quarter, the Company's most significant current
asset was accounts receivables of $93.4 million from its major
distributor, which grew from $82.07 million on December 31, 2008,
in the recessionary environment. As previously disclosed, the
Company has in place a third party guarantee of receivables to
reduce the risk of possible default and continues to pay close
attention to this matter.
Pursue The Same Strategy
The Company said it is continuing to pursue a multipronged
strategy to return to higher growth and improved profits as the
economy improves. Underlying this is a belief that the
reorganization of the telecom carriers will lead to market
development, including areas where the Company has demonstrated
strength before the world financial crisis and industry
restructuring began, such as special application phones. Further,
the Company anticipates the new 3G technology will spur market
demand. At the same time, it sees handset prices likely to continue
to decline as they have become fast-moving consumer goods.
Going forward, the Company will continue to explore the sale of
more GSM phones in traditional markets, using its proven ability to
respond to the needs of target consumers. It also still plans to
launch its own 3G products, and believes it is capable of
establishing a visible market share. It also is pursuing capital
funds to enhance the structure of the Company with certain
acquisitions. Additionally, it will remain focused on improving its
collection of receivables and cost management.
"We have demonstrated our resiliency in a difficult environment
and will continue to work hard to resume the growth that we are
capable of achieving," Mr. Liu stated.
About Orsus Xelent Technologies, Inc.
Incorporated in the State of Delaware and headquartered in
Beijing, China, Orsus Xelent Technologies, Inc. is an emerging
designer and manufacturer of award-winning mobile phones for the
Asian market, primarily the People's Republic of China ("PRC"). The
Company's business encompasses the design of mobile phones, related
digital circuits, and software development, and it is a recognized
pioneer in mobile phone integration technology. It introduced the
region's first wristwatch-style cellular phone, and it continues to
break new ground with state-of-the-art phones that include advanced
features such as fingerprint recognition and touch-screen displays.
The Company also is focused on developing and marketing, under its
Proxlink trademark, special application mobile phones for
specialized users in a wide variety of professions in business and
government. Since the Company's launch in 2004, it has established
"Orsus" as a popular brand and achieved a significant share of the
world's largest mobile phone market. It maintains more than 179
service call centers across the PRC, with additional offices in
Shanghai, Hong Kong, Shenzhen, and Tianjin. For more information,
please visit the Company's web site: www.orsus-xelent.com.
Information Regarding Forward-Looking Statements
Except for historical information contained herein, the
statements in this Press Release are forward-looking statements
that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties, which
may cause our actual results in future periods to differ materially
from forecasted results. These risks and uncertainties include,
among other things, product demand, market competition, and risks
inherent in our operations. These and other risks are described in
our filings with the Securities and Exchange Commission.
Orsus Xelent Technologies, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income and Comprehensive Income
(US dollars in thousands except share and per share data)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales 19,125 29,240 62,181 78,853
Cost of sales 17,053 25,073 53,928 68,302
---------- ---------- ---------- ----------
Gross margin 2,072 4,167 8,253 10,551
Operating expenses:
Selling expenses 40 128 213 353
General and administrative
expenses 164 228 533 1,799
Research and development
expenses 4 250 32 391
Depreciation 12 23 54 72
---------- ---------- ---------- ----------
Total operating
expenses 220 629 832 2,615
---------- ---------- ---------- ----------
Operating income 1,852 3,538 7,421 7,936
Other income
(expenses)
Interest
expense (270) (255) (758) (733)
Other income - 87 17 465
---------- ---------- ---------- ----------
Income before income tax
expense 1,582 3,370 6,680 7,668
Income tax expense 212 445 868 1,320
---------- ---------- ---------- ----------
Net income 1,370 2,925 5,812 6,348
========== ========== ========== ==========
Other comprehensive
income
Foreign currency
translation adjustment 59 (36) 302 1,480
---------- ---------- ---------- ----------
Comprehensive income 1,429 2,889 6,114 7,828
========== ========== ========== ==========
Earnings per share:
Basic and diluted 0.05 0.10 0.20 0.21
========== ========== ========== ==========
Weighted average number of
common shares outstanding
- basic and diluted 29,756,000 29,756,000 29,756,000 29,756,000
========== ========== ========== ==========
Contacts PRC: Orsus Xelent Technologies, Inc. Guoji Liu CEO Tel:
010-85653777 Fax: 010-85653666 US: Ken Donenfeld Tel: 212-402-7838
Fax: 646-381-9727
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