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Dear Shareholders:
On behalf of the board (the "Board") of directors (the "Directors") of the Company, I am pleased to present the annual report of the Group for the financial year ended 31 December 2007. I would like to express my sincere gratitude for your concern and support for the Company.
REVIEW OF THE PERFORMANCE OF THE GROUP FOR THE YEAR END 31 DECEMBER 2007
Operating Results
The Group recorded outstanding performance in 2007. Total revenue of the Group in 2007 was increased by 99.4% to HK$1,277.7 million from HK$640.9 million in 2006. The increase was mainly attributable to the growth in revenue from the Group's dual-mode smartphone business.
The Group's net profit for the year ended 31 December 2007 was HK$167.5 million, representing a significant year-on-year increase of 212.0%. The net profit margin in 2007 rose to 13.1% from 8.4% in 2006.
Basic and diluted earnings per share for the year ended 31 December 2007 were HK$8.33 cents and HK$7.98cents, respectively.
Dividends
The Directors do not recommend the payment of any final dividend for the year. The Group intends to capitalize the profit on R&D of new technologies and the fixed assets.
Business Review
The revenue and profit of the Group in 2007 reached a significant increase respectively, because the Group broadened its product lines and its customers' base during the year. The Group has launched twelve (12) dual-model smartphones in 2007. Most notably, the Group launched three (3) GSM-GSM dual-mode smartphones supplied them to a China's GSM network operator since July 2007, and the Group has developed co-operation relations with China's biggest network operator since then.
As an enterprise which places strong emphasis on the R&D for products and innovations, the Group has established an outstanding R&D team and has become one of the strongest smartphone developers in Mainland China. The Group has restructured its R&D department to establish an ID center in June 2007, in order to improve its products design and R&D capabilities.
At the early stage of China 3G commercialization, the Group obtained satisfactory results in TD-SCDMA network trials through close collaboration with China telecommunications operators. In addition, the Group received a China 3G Access License from the Ministry of Information Industry of the People's Republic of China (MII). Subsequently, the Group launched Coolpad 6260 as its first TDSCDMA-GSM dual-mode smartphone in the PRC.
The Group cooperated closely with a number of well-known global technologies companies, like Microsoft, Qualcomm, Datang and TI. The Group now has been one of the biggest developers specializing in operating system based on Windows CE in the world. The Group has also been cooperating with Qualcomm in the chipset field. The Group invested in a broad range of advertising and marketing initiatives to strengthen the "Coolpad" brand recognition, maintaining its high and good reputation in China's smartphone market.
The Group expanded its after-sales team considerably and committed to offering the best after-sales service for Coolpad users. The Group has established Coolpad after-sales service shops in all municipal cities, as well as most secondary cities in Mainland China. And the Group launched various training programs for operators' salesman to enhance their skills to well support the customer's after-sales service.
The Group has strove to develop its value-added business during the last year. The Group has provided many value-added services for Coolpad users, such as games downloading, GPS, online TV, video, securities trading, wireless data backup and resolving and others. The Group believes all these will pave the way for the Group's long-term development.
The Group put a strong emphasis on sound financial management and on the enhancement of general operation efficiency. Especially, the audit department of the Company helped the Group improve its financial audit to strengthen the financial regulation and the financial risks management of the Group.
All in all, the Board and the management (the "Management") of the Group have done a great deal of hard work to improve the Company's key competitive advantages to consolidate its leading position in the field of wireless technologies.
PROSPECTS OF THE GROUP FOR 2008
The Group's focus in 2008 is as follows:
The Group will endeavor to capitalize on R&D development to expand its China's high-end dual-mode smartphone market share through delivering additional high quality and differentiated smartphones. The Group plans to launch six (6) CDMA-GSM dual-mode models, four (4) GSM-GSM dual-mode models and another two CDMA single-mode smartphones. Being one of the most important TDSCDMA-GSM dual-mode smartphone developers, the Group plans to develop two (2) to three (3) TDSCDMA-GSM dual-mode models in 2008. The Group believes that the TDSCDMA-GSM devices will get a larger share in the China's 3G dual-mode smartphones market, and it will further broaden the Group's source of revenue in 2008.
The Group will further improve its R&D platform and solutions. Through the integrated and standards-based development platform, the Group will make the Coolpad terminals and wireless data solutions compatible with more third-party applications. In order to broaden its source of revenue, the Group will take new ventures to develop the "Coolpadtone" data service and other wireless data solutions. The Group will also expand its product portfolio to support for emerging network technologies, such as WiMax, WCDMA, CDMA2000, etc.
The Group strives to further cooperate with telecom operators to broaden its client base and work closely with other well-known enterprises to enhance its R&D capabilities. The Group will participate in more domestic and global telecommunications exhibitions and improve its media exposure by placing more advertisement in newspapers, aviation magazine and other outdoor media.
The Group strives to penetrate the overseas markets by cooperating with foreign telecommunications operators in respect of its own Coolpad brand. In addition, the Group will improve its customer services in the coming year. And in line with its existing policies, the Group will put strong emphasis on the human resource deployment.
The Board and the Management are looking forward to the future and are confident in the Group's development and prosperity, although the Group still faces challenges from its competitors and uncertainties of China telecommunications operators' restructuring in 2008. We will adhere to the philosophy of hard working to achieve excellence through the Group's operations and deliver sound results to the shareholders and the society.
Guo Deying
Chairman Executive Director and CEO
HongKong, April 14, 2008
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