Bottom line: Huawei’s latest big financial commitment to the UK is mostly for show, but Britain could still emerge as a winner over the longer term if Huawei conducts more R&D work in its British labs.
Huawei gives $4.2 billion gift to UK
After getting the cold shoulder from the US for its smartphones, telecoms superstar Huaweiis turning increasingly to Europe, and specifically to Britain, for consolation. That’s the key takeaway from the latest reports that say Huawei has told British Prime Minister Theresa May that it will spend a further 3 billion pounds ($4.2 billion) on procurement from the UK on top of its other commitments to the country. (English article)
This particular move seems mostly political, and also it’s questionable how significant it is. Huawei made its commitment last week during a trip by Theresa May to China, and this kind of mega-commitment is quite common during these meetings between Chinese and global leaders. The fact of the matter is that Huawei posted 600 billion yuan ($97 billion) in sales last year, meaning it had to spend perhaps half of that amount, or around $50 billion, on procurement of various components for its core networking equipment and smartphones. Read Full Post…
Bottom line: ZTE’s change of leaders is a much-needed move to revive the company’s fortunes, though the choice of its former technology chief as new chairman looks a bit conservative.
ZTE gets new chairman
Following a turbulent period that saw it nearly lose access to many of its key suppliers, telecoms giant ZTE (HKEx: 763; Shenzhen: 000063) has just announced the arrival of a new chief, as it seeks fresh starts in its 2 main businesses selling networking equipment and smartphones. Many are pointing to ZTE’s recent run-in with Washington for illegally selling products to Iran as the direct reason for the departure of Shi Lirong, who was chairman for the last 6 years.
Perhaps that’s partly true, but the reality is that Shi’s tenure at the helm of ZTE has been marked by a much longer series of stumbles that has cost the company millions of dollars in sales and market value. Those missteps led ZTE to launch a major overhaul a couple of years ago that seemed to be showing results for its older networking equipment business. But more recently ZTE’s newer smartphone business has been showing signs of stumbling, and the latest Iran controversy may have driven the board’s decision to replace Shi. Read Full Post…
Bottom line: ZTE will avoid major fallout from its clash with Washington over illegally selling products to Iran, though its shares could drop 5-10 percent when trade resumes after its April 6 results announcement.
ZTE seals plea agreement with Washington
It’s not often that I write about earnings date announcements, but in this case one such announcement from telecoms equipment maker ZTE (HKEx: 763; Shenzhen: 000063) appears to show it believes it has found a long-term resolution to its recent run-in with Washington. ZTE was originally set to publish its fourth-quarter results on Wednesday this week, but hastily scrapped that plan after the clash began with Washington earlier this month.
Now ZTE has just published an announcement detailing what it hopes will be a long-term resolution to the clash, which began when Washington find it guilty of selling US equipment to Iran in violation of a ban. As a result, ZTE has announced a new date of April 6 for releasing its fourth-quarter and full-year results. (HKEx announcement) Read Full Post…
Bottom line: ZTE will lose its appeal of tough US export sanctions for illegally selling high-tech equipment to Iran, as Washington sends a strong signal that companies engaging in such actions will face stiff punishment.
ZTE to appeal US sanctions
An increasingly frantic ZTE (HKEx: 763; Shenzhen: 000063) is working on several fronts in a bid to stop crippling US sanctions, after Washington determined the company illegally sold equipment to Iran. I used to be a strong supporter of compromise in China’s frequent trade conflicts with the west, and still believe that some form of compromise might be the best solution here.
But at the same time, the frequent tendency by Chinese companies to flout laws and agreements both at home and abroad shows that sometimes harsher measures are the only way to convince these firms to play by the rules. Accordingly, I do expect we could see Washington take a relatively tough stance against ZTE in this case, despite protests from Beijing and the potential for big disruption to the operations of one of China’s largest telecoms equipment makers. Read Full Post…
Bottom line: The US should penalize ZTE for violating trade restrictions against Iran, but should moderate the severity to acknowledge that Chinese firms are improving their adherence to global laws and standards.
ZTE assists with US probe
Two days after exploding into the headlines, US sanctions against ZTE (HKEx: 763; Shenzhen: 000063) continue to ripple through the news as the Chinese telecoms equipment maker faces major disruptions to its supply chain. Washington has determined that ZTE sold equipment from US companies to Iran in violation of export restrictions against the country at the height of an international dispute about its nuclear development program.
As a result of its finding, which comes after a 4-year investigation, all of ZTE’s US suppliers, including the likes of Microsoft (NYSE:MSFT) and Oracle (Nasdaq: ORCL), must now apply for export licenses before they can sell to ZTE. Media reports have indicated that Washington is likely to deny such license requests, as punishment to ZTE for violating the trade restrictions. Read Full Post…
Bottom line: ZTE will face major supply chain disruptions following new punitive US actions for violating UN sanctions against Iran, forcing it to lower its 2016 sales targets by up to 10-15 percent.
ZTE braces for US sanctions
Officials at telecoms equipment and smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) got a rough start to the new week, after media reported the company was set to get punished by Washington for selling products to Iran in violation of earlier UN sanctions. The news quickly buzzed through the headlines, and prompted ZTE to request a halt to trading of its Hong Kong-listed shares. (HKEx announcement)
This particular case actually dates back to 2012, when reports emerged that the FBI was investigating ZTE for illegally selling US computer equipment to Iran at the height of tensions with the west related to its nuclear development program. (previous post) Crosstown rival Huawei also faced similar accusations at that time. Read Full Post…
Bottom line: Shares of Tencent and Alibaba are overvalued and will stagnate or fall for the rest of the year, while a group trying to buy out Sungy Mobile may have to raise its offer but should succeed in privatizing the company.
Froth builds on Tencent stock
It seems I was partly wrong when I previously said that e-commerce giant Alibaba (NYSE: BABA) was quite expensive following its record-breaking IPO last year, and that its value would gradually sink to a level comparable with rival Tencent (HKEx: 700). In this case I wasn’t wrong in thinking the 2 companies should be comparably valued. Instead, I should have focused on the potential for a rally in Tencent shares, which have risen sharply to approach Alibaba’s level since the start of the year.
While those 2 companies look comfortably situated in the stratosphere of Internet valuations, the same can’t be said for mobile game operator Sungy Mobile (Nasdaq: GOMO), which has just announced its receipt of a management-led buyout offer. If the attempt succeeds, it would mean Sungy’s life as a publicly traded company could end after less than 2 years, the briefest for a listed Chinese company that I’ve ever seen. Read Full Post…
Bottom line: Beijing’s delay of new rules for foreign tech firms selling to Chinese banks could mark a turning point in a looming trade war centered on cybersecurity, and Washington should move to take reciprocal action.
Beijing slows down on new cybersecurity rules
After months of heating tensions, we’re seeing a sudden pause in the growing friction between China and the west that looked set to erupt into a new trade war centered on the sensitive issue of cybersecurity. That’s my assessment on reading that China is delaying implementation of draconian new requirements that would have forced all foreign tech firms to hand over sensitive and highly confidential product information when selling to Chinese banks.
I’m certainly not being naive in believing that China’s delay in this instance is the result of its realization that there’s no security risk posed by products supplied by foreign tech giants like IBM (NYSE: IBM), Cisco (Nasdaq: CSCO) and Oracle (Nasdaq: ORCL). Instead, this delay is almost certainly the result of repeated protests from the companies themselves and also from Washington and Europe, which all argue the new requirements are overly and unnecessarily intrusive. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 17-19. To view a full article or story, click on the link next to the headline.
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Goldman, Morgan Stanley In Talks To Buy Stake In China’s Huarong: FT (English article)
China Seen Probing IBM, Oracle, EMC After Snowden Leaks (English article)
