Sanctioned ZTE Corp income dives by 65pc

Business | 26 Oct 2018 4:23 pm

ZTE Corp’s quarterly earnings plunged by 65 percent, underscoring a difficult recovery from U.S. sanctions that briefly brought China’s No 2 telecommunications gear vendor to a standstill.

The state-backed company reported net income of 564.5 million yuan for the quarter ended September, compared with its own projection for almost break-even to 1.02 billion yuan. Revenue for the period slipped by 14 percent to 19.3 billion yuan, Bloomberg reports.

ZTE is recovering from a months-long U.S. Commerce Department ban on purchases of American technology, including components needed to produce its smartphones and networking equipment. Washington agreed to lift that moratorium -- punishment for violating and lying about sanctions on exports to Iran and North Korea -- only after ZTE agreed to replace its board and senior management and paid more than $1 billion in penalties.

Investors however remain cautious on Chinese corporations as U.S. tensions escalate. ZTE has since initiated a number of efforts to lower costs, including restructuring a smartphone arm that’s become a drag on the overall business. Beijing has also reportedly asked the country’s biggest telecom carriers to favor ZTE when purchasing equipment. In August, the company predicted net income of 24.2 million yuan to 1.02 billion yuan in the September quarter, a wide range that reflected its uncertain prospects.

ZTE is now counting on emerging markets to offset setbacks in developed markets like Australia, which have blacklisted ZTE and rival Huawei Technologies Co. ZTE’s cheaper products enjoy an edge in developing countries.

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