ZTE took a $2 billion hit but it'll soon be making a profit again

What did ZTE actually do wrong?
What did ZTE actually do wrong?

The Chinese tech company brought to its knees by a crippling US ban says it will soon be back in the black.

ZTE (ZTCOF), which makes smartphones and network equipment, was thrown into crisis in April when the US Commerce Department blocked American companies from selling it vital components. The move forced it to halt almost all of its operations and fueled tensions between the Chinese and US governments.

It's back in business now after paying a $1 billion fine and agreeing to heavy oversight from the US government.

The months-long ban delivered a heavy blow to ZTE's revenue, which dropped to 39.4 billion yuan ($5.8 billion) for the first half of the year from 54 billion yuan ($7.9 billion) a year earlier. Combined with the hefty fine, the ban helped drag the company to a net loss of 7.8 billion yuan ($1.1 billion).

But ZTE predicts it will post a net profit of as much as 1 billion yuan ($146 million) for the quarter ending in September, according to its earnings report released late Thursday.

"ZTE is rapidly moving back on track," Edison Lee, an analyst with investment bank Jefferies, said in a research note.

zte shanghai may 3

The company's shares rose more than 1% in Hong Kong on Friday, but they are still down about 40% from where they were before the ban.

The US government said it imposed the ban because ZTE violated an earlier deal punishing it for evading sanctions on Iran and North Korea.

The Trump administration's decision to lift the ban after an intervention by Chinese President Xi Jinping was controversial in Washington. Some members of Congress sought unsuccessfully to keep the restrictions in place, citing national security concerns.

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