ZTE Q3 drags first nine months to loss

Chinese networking vendor says it expects losses up to US$317 million for the third quarter as its business was "adversely affected" by U.S. investigations into its deals in Iran.
Written by Liau Yun Qing, Contributor

Chinese networking vendor ZTE is expected to make a loss of up to 2 billion yuan (US$317 million) for its third quarter as U.S. investigations of its deals in Iran "adversely affected" business for the period.
This compares with a profit of 299 million yuan (US$47 million) in the same period last year, said ZTE in its preliminary results statement to the Hong Kong Stock Exchange Sunday.

The losses are expected to pull overall earnings for the first nine months into the red, with the company predicting a loss in net profit of up to 1.75 billion yuan (US$277 million). There were already warnings in August, when ZTE announced its first half net profit dropped 68 percent to 244.9 million yuan (US$38.7 million).

ZTE said its business has been "adversely affected" by the Iranian market. "The United States Department of Commerce and the United States Department of Justice are currently investigating [ZTE] and its subsidiaries over deals with Iran, and we are lending our cooperation in respect of such investigation," it noted in the statement.

In March, news broke out that ZTE had allegedly sold spy equipment to the Iranian government. However, a company spokesperson denied the charges when contacted by ZDNet Asia, saying the company only sold "standard" equipment.

According to leaked U.S. Federal Bureau of Investigation (FBI) investigations, ZTE sold phones with U.S.-manufactured components to "banned' countries" by creating a network of sub-companies. To sell to Iran, for instance, the FBI said ZTE created companies that would do the purchasing of the tech devices while others delivered the devices into Iran.

Last week, U.S. congressional committee said Chinese telecom equipment manufacturers such as Huawei and ZTE posed a security threat. The Chinese companies will be barred from mergers and acquisition in the U.S. and private American companies should be discouraged from working with them.

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