TechFaith 3Q10 Revenue Exceeds High-End of Prior Guidance

BEIJING, Nov. 23, 2010 /PRNewswire-Asia/ -- China TechFaith Wireless Communication Technology Limited (Nasdaq: CNTF) ("TechFaith" or the Company) today announced its unaudited financial results for the third quarter ended September 30, 2010.

For the third quarter of 2010, TechFaith reported net revenue of US$ 68.6 million (RMB 464.3 million), a 30% increase compared to US$ 52.8 million (RMB 360.7 million) in the third quarter of last year. Gross margin for the third quarter of 2010 was 24% compared to 19% in the same quarter last year. Income from operations for the third quarter of 2010 was US$ 9.0 million (RMB 60.9 million), a 61% increase compared to US$ 5.6 million (RMB38.3 million) in the same quarter last year. Net income attributed to TechFaith for the third quarter of 2010 was US$ 4.3 million (RMB 29.1 million), compared to a loss of US$ 3.4 million (RMB 23.2 million) in the same quarter last year. Third quarter of 2010 results reflect the non-cash impact of a US$ 3.3 million loss due to IDG's conversion in the quarter of US$ 6.25 million convertible bonds into TechFaith ordinary shares and the remaining US$3.75 million into shares of TechFaith's gaming subsidiary 798 Entertainment, compared to a US$9.2 million non-cash loss in the same quarter last year as a result of change in fair value of derivatives associated with the convertible note.

Ms. Ouyang Yuping TechFaith's CFO, said, "Revenue in the third quarter exceeded our prior guidance and reached another record level for TechFaith. In addition to the higher revenue levels, the successful implementation of our business strategy is resulting in a more stable gross margin. Continued growth in our branding business, QIGI, was led by strong demand for existing phone models, along with initial shipments of two new high end smartphone models into the China market. TechFaith remains in a position of operating strength with continued growth expected in each of our operating units, along with a continued strong balance sheet with approximately US$3.70 per ADS in cash and cash equivalents."

Mr. Deyou Dong, President and COO of TechFaith in charge of the company's mobile business said, "Our focus in the mobile business has been on market expansion and profitable unit growth.  To achieve this we have cooperated with global leading brands, built our enterprise business and acquired the QIGI branded phone business.   In the case of QIGI, total shipment volume increased 20% in the third quarter of 2010 compared to the second quarter of 2010. This improvement was driven by growth in the domestic smartphone market and demand from enterprise mobile phones users.  QIGI's fast growth is in line with our expectations and we expect our branded mobile phone business to become one of our major business segments.  To support the expected growth, we recently announced the planned addition of a major 10 million-unit capacity smartphone production line.  As for our ODP business, we expect continued stability in revenue and gross margin to continue from the China, India, South East Asia, Middle East and Latin America Markets."

798 Entertainment Management Change

The Company announced the appointment of Mr. Tony Kong as the CEO of 798 Entertainment. Mr. Kong, who joined TechFaith four years ago, has served as director in the sales department, and President of 17Wee. His performance and strong experience in the motion gaming business are expected to help drive growth and further success in the gaming business. Mr. Defu Dong, Chairman and CEO of TechFaith, will continue to serve as the Chairman for 798 Entertainment.

Mr. Tony Kong, CEO of 798 Entertainment, said, "We continue to make progress in our gaming business.  We are particularly excited about our Motion and Mobile games, where our 17Wee unit is generating positive market feedback because it is clearly differentiated and gives us a competitive edge.  Awareness was rapidly built during the China Tennis Open as 17Wee was one of the official sponsors, and produced a virtual tennis competition in conjunction with the live event.  Various motion gaming accessories, including the 17Phone, have been launched to enhance the game experience, which is more entertaining and healthier."

Fourth Quarter 2010 Outlook

The below forecast reflects TechFaith's current and preliminary view, which is subjected to change. TechFaith currently expects revenue for the fourth quarter of 2010 to be in the range of US$ 74.0 million to US$ 77.0 million, with gross margin levels similar to the third quarter of 2010.

Looking forward, Mr. Defu Dong, Chairman and CEO of TechFaith added: "We expect further sequential growth based on the strength of our core ODP, branding and expanding gaming business, with increased business momentum in 2011."  

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Tuesday, November 23, 2010 at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Tuesday, November 23, 2010 in Beijing).  The dial-in phone number is +1-857-350-1671. The conference call passcode is 50236591. A live webcast of the conference call will also be available on TechFaith's website at www.techfaithwireless.com.

A replay of the call will be available approximately 2 hours after the conclusion of the live call through 10:00 a.m. U.S. Eastern Time on November 30, 2010, (11:00 p.m., November 30, 2010 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 40022705. A webcast replay will also be available at http://www.techfaithwireless.com.

About us

TechFaith (NASDAQ: CNTF) is a China-based original developed product ("ODP") provider focused on the original design and sales of mobile phone products. TechFaith aims to become a branded mobile phone specialist in differentiated market segments in the China market. TechFaith is also striving to build a leading PC and online gaming business through its wholly-owned subsidiary, 798 Entertainment Limited.

• TechFaith engages in the development and production of middle to high end handsets and tailor made handsets.  TechFaith's original developed products include: (1) multimedia phones and dual mode dual card handsets of multiple wireless technology combination such as GSM/GSM, GSM/CDMA, GSM/WCDMA, GSM/TD-SCDMA and UMTS/CDMA; (2) Windows-based smartphones and Pocket PC phones; and (3) handsets with interactive online gaming and professional game terminals with phone functionality.
• With the capability of developing Middleware Application MMI/UI software on 2G/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS, TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith is able to provide Middleware Application MMI/UI software packages that fulfill the specifications of handset brand owners and carriers in the global market. For more information, please visit www.techfaithwireless.com.
• TechFaith is aiming to become a branded mobile phone specialist for differentiated market segments in the China market, such as under its wholly-owned subsidiary brand name QIGI for smartphone business which targets enterprise users and operator tailored market, under Glomate brand, selling other brand names for girls and teenagers, under the TechFace brand name to target the market of outdoor sports enthusiasts.
• TechFaith is targeting motion, the mobile and online PC gaming markets through its websites www.17wee.com, www.798uu.com and www.798game.com with gaming content developed internally, co-developed and licensed from third parties.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith and management quotations contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

SOURCE China TechFaith Wireless Communication Technology Limited