Comtech Group, Inc. Announces the Signing of a $1 Million Business Services Contract With Huawei
biz.yahoo.com
Monday March 6, 8:00 am ET
First Significant Service Contract With Additional Business Expected During the Year
SHENZHEN, China, March 6 /PRNewswire-FirstCall/ -- Comtech Group, Inc. (Nasdaq: COGO), a leading provider of customized module design and subsystem solutions for technology product manufacturing companies based in China, today announced it has secured its first major service contract for its newly acquired business service offering with Huawei, a leading global telecommunications equipment provider.
This is the first significant service contract secured since the announcement of its acquisition of Huameng in January and is initially valued at $1 million (USD). Comtech will provide engineering, technical consulting and other business services to Huawei's carrier customer base in China's Hunan province. The contract will cover primarily Datacom and Broadband products, where Comtech will be responsible for in-field installation, integration and system testing within each of Huawei's respective customer sites. Comtech is currently in negotiations with Huawei to expand into additional provinces and regions for other fast growing technical areas such as wireless business services. Additionally, several other current telecom customers have communicated to Comtech the decision to outsource their business services and the Company expects to receive future services contracts in the near term. Given contracts in backlog and current visibility, Comtech expects to achieve strong revenue growth in services during 2006 with a corresponding 40 to 50 percent gross and operating margin contribution, much higher than Comtech's margins on existing business.
Jeffrey Kang, Chairman and Chief Executive Officer of Comtech Group, commented, "This is the first of several contracts we expect to sign as we begin to grow our business services revenue within our installed customer base. Our customers already have a substantial need for business services and we believe through the acquisition of Huameng we can successfully capture a portion of this business. It is estimated that Huawei alone will outsource over $300 million (USD) in business services in 2006, up from $150 million (USD) during 2005."
Mr. Kang continued, "Our first service contracts will be primarily based in China but we are also pursuing several opportunities which will expand the business internationally. As customers like Huawei extend their presence globally, we have an opportunity to grow along side them with both our traditional business of customized module designs and now with our new services offering. We are enthusiastic that our expansion into business services will provide another growth driver, while improving our visibility and margins." |
