“Although we expect the tough environment will continue to have an impact on the Company throughout the year, we believe the slowdown of our business is temporary. When the difficult market conditions ease and our business restructure strategy is fully implemented, we expect to regain growth momentum. Our core competency, industry reputation and customer relationship in our core IT and DT segments remain strong, and we are highly confident in our abilities to sustain long-term growth and create shareholder value.”
Mr. Jiang Huai Lin, chairman and chief executive officer of the Company, commented, “As expected the first quarter was a weak season for the Company. Revenues and net income declined 39.6% and 134.8% year-over-year to $16.3 million and a net loss of $2.9 million, respectively. In addition to seasonality, the challenging market conditions remained a main contributor to the weakness of this quarter as the Chinese government’s implementation of tightening policies continued to have a dramatic impact on our government IT projects. In addition, in the Company’s efforts to improve its earnings quality and transition to a more healthy and sustainable product mix also led to relatively weak results: we have executed more stringent customer acceptance initiatives in the IT segment, while investing much time and capital in incubating our DT product offerings and customer base with the aim to ease our reliance on government clients and capture new market opportunities.
“Our traditional core IT Segment decreased by 46.0% and accounted for 63.0% of total revenues in the first quarter as in the current government tightening environment we received fewer large-scale public security projects for our DPST business, which used to be the main contributor of our IT line and total revenues. However, we are pleased to see our GIS business continues to secure important contract opportunities under projects related to China’s ‘Smart Grid’ and ‘Map World’ national initiatives; while in our digital hospital segment, we successfully entered Hunan and Guangxi Provinces by building a productive sales network and winning a significant number of contracts with new hospital and health authority customers in these areas. We expect our GIS and HIS businesses to continue to grow in 2012 and become the main growth drivers for the Company’s IT segment over the long-run.
“Although we expect the tough environment will continue to have an impact on the Company throughout the year, we believe the slowdown of our business is temporary. When the difficult market conditions ease and our business restructure strategy is fully implemented, we expect to regain growth momentum. Our core competency, industry reputation and customer relationship in our core IT and DT segments remain strong, and we are highly confident in our abilities to sustain long-term growth and create shareholder value.”
