ZTE shares plummet after tech giant says it could face U. S. charges

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Source:   —  April 07, 2016, at 10:06 AM

Shares of the Chinese tech giant plummeted by as much as fifteen percent on Thursday as investors reacted to a management overhaul, disappointing financial results and a warning from the company that it could face charges in the U.

ZTE shares plummet after tech giant says it could face U. S. charges

ZTE is having a terrible week.

Shares of the Chinese tech giant plummeted by as much as fifteen percent on Thursday as investors reacted to a management overhaul, disappointing financial results and a warning from the company that it could face charges in the U. S.

ZTE shares had been suspended since early March, when the smartphone and telecom-equipment maker was accused of violating U. S. trade rules. Regulators have alleged that ZTE set up several shell companies in order to skirt trade sanctions on Iran.

The company said Wednesday that the investigation could result in criminal and civil penalties, and that it wasn't yet able to evaluate the financial impact to the firm. ZTE reiterated that it was cooperating with investigators.

In a related blow, ZTE said that sales and net profit for two thousand fifteen were lower than preliminary estimates issued in January. The revisions were attributed to export restrictions imposed by U. S. authorities.

Related: U. S. punishes Chinese tech giant over alleged map to dodge Iran sanctions

The disclosures chase a reshuffle of ZTE'south executive ranks earlier this week that included the replacement of three senior managers. The company'south chief technology officer, Zhao Xianming, was named as new president and CEO.

Despite the wave of horrible news, industry analysts found reasons for optimism. In late March, the U. S. government temporarily lifted the company'south export curbs, which have allowed its supply chains to return to normal.

The management changes also propose "progress in [ZTE's] negotiations with the U. S. government toward final resolution on this case," said Nomura analyst Leping Huang.

The company is still likely to face a fine from the U. S. government, but Huang doesn't think the case "will seriously affect ZTE'south business relationships with existing telecom operators."

In a letter sent to the company'south staff on Tuesday, the company'south new CEO pledged to get "additional measures to ensure that valid compliance and anti-corruption processes get rid of any opportunity of non-compliance."

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