All but bankrupt some three months ago, ZTE Corporation yesterday announced a stunning comeback from the grave, and said it expects to deliver a modest profit in the third quarter of this year.
The unexpected news from the world's fourth largest telecommunications equipment maker by market share comes after it reported its worst-ever first-half net loss of $1.3 billion as a result the U.S. government in April banning use of its equipment in the United States. That ban forced ZTE to stop operations for three months.
This huge loss will inflict a net loss of $1.4 billion on ZTE for the first nine months of this year despite its forecast of a net profit from July to September. ZTE said its operating revenue in the first half of this year plummeted 27 percent to $5.7 billion.
For this third quarter, ZTE estimates a net profit of between $3.5 million and $146.4 million. This compares unfavorably with a net profit of $234 million year-on-year and a net loss of of $1.14 billion in the first half of 2018.
ZTE's new top management team told shareholders on Tuesday that production has returned to normal while orders for its telecommunications equipment are in line with those of July and August 2017.
ZTE almost died in April when the United States federal government imposed the seven-year ban on it. Washington said ZTE broke an agreement to discipline executives that conspired to evade U.S. sanctions on Iran and North Korea.
The United States lifted the ban in July after ZTE paid $1.4 billion in penalties. The company agreed to fire its top management team, so the U.S. would permit it to do business again.
Based in Shenzhen, ZTE manufactures smartphones, wireless, exchange, access, optical transmission and data telecommunications equipment. ZTE is 33 percent owned by Chinese-government-owned enterprises.
It was fined $1.2 billion in 2017 after it was found to have violated U.S. sanctions against Iran and North Korea. The U.S. government in April 2018 banned ZTE from purchasing U.S. components for seven years - a decision that essentially forced ZTE to shut down its operations.
In January 2018, the U.S. Congress introduced a bill that banned U.S. government agencies from using phones and equipment made by ZTE. In April, the U.S. Department of Commerce banned ZTE from operating in the U.S. after the company failed to meet a plea agreement after it pleaded guilty to illegally shipping U.S. equipment to North Korea and Iran.
Also in April, the Federal Communications Commission (FCC) voted 5-0 to ban the use of government subsidies to purchase telecom equipment from companies such ZTE deemed a risk to national security. A draft of the policy statement specifically named ZTE as an example.
