Beleaguered ZTE Corporation, China's leading telecommunications equipment maker, has recovered somewhat from the crippling effect of United States' sanctions directed against it from April to July 2018.
The Shenzhen-based firm was accused by Washington of tweaking its smartphones so that China's intelligence services could listen in on whatever conversations they wanted.
ZTE reported what appeared to be positive results for its first quarter 2019 operations in a filing with the Hong Kong Stock Exchange on Wednesday. It said it anticipated making a net profit of $119 million to $178 million in the first quarter, a massive jump from its net profit of $41 million compared to the fourth quarter of 2018. ZTE said its revenue for Q4 2018 came $4.0 billion.
On the other hand, its full-year 2018 revenue plunged 21.4 percent to $12.7 billion, as against an average estimate of $13.0 billion by 12 analysts. The revenue fall was the first time revenue has dropped below the $15 billion marks since 2014.
And because of the U.S. sanctions, ZTE reported its worst half-year loss of $1.2 billion in August. This loss contributed mightily to a 2018 full-year loss of $1.0 billion. ZTE claims this loss was within its guidance range of $922 million to $1.1 billion but far larger than the average $922 million loss estimated by 10 analysts, according to Refinitiv Eikon data.
Hong Kong-listed shares of ZTE jumped as much as 14 percent to HK$25 on the cheery Q1 2019 news. Shenzhen-listed shares rose by the daily maximum limit of 10 percent.
ZTE said that during the reporting period, its major business "continued to recover, bolstered with the window of opportunity of 5G development and its technological innovation capabilities. The company has become a key supplier with 5G end-to-end solution capabilities,"
Some analysts, however, complained about the way ZTE tried to spin its disappointing results for 2018.
They noted that ZTE's earning's report boasted of its "ramped-up investment in 5G R&D" but without revealing any verifiable figures. ZTE also took pains not to talk too much about the sanctions levied against it by the U.S. and the $1.4 billion in penalties it had to pay to get the sanctions lifted.
