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May 7, 2018

Acacia Communications bracing for Chinese ban

Photo | File The Maynard headquarters of Acacia Communications at Mill & Main.

After being forced to suspend its relationship with a Chinese company banned from U.S. commerce, Maynard communications equipment manufacturer Acacia Communications is expecting its second quarter revenues to decrease between $7-13 million.

The company in its first quarter financial results released last week said the seven-year denial order of export privileges of American products for China-base ZTE Corp. will have an adverse impact on the company’s fiscal picture.

Acacia is expecting second quarter revenues about $7 million and $13 million lower than the first quarter.

The company's first quarter revenues were $72.9 million, resulting in a net loss of $9.1 million. 

“Although the denial order will have an adverse impact on our business for the foreseeable future, we are prioritizing several initiatives and opportunities that we believe will help mitigate that impact,” Acacia President and CEO Raj Shanmugaraj said in a press release. 

The company is taking steps to reduce operating expenses while continuing funding for core projects, he said.

Acacia’s stock plunged from about $40 per share to $25.51 after news of the ban last month. On Monday, the company’s stock price opened at $29.80. 

U.S. Secretary of Commerce Wilbur Ross announced April 16 the activation of the seven-year denial of export privileges of American products for ZTE Corp. after the Department of Commerce determined the Chinese company failed to live up to a March 2017 agreement.

The 2017 agreement had ZTE paying a civil and criminal penalty and forfeiture of nearly $1.2 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice, including through preventing disclosure to and affirmatively misleading the U.S. government.

The company agreed to the seven-year ban if it violated any terms of the agreement. The Department of Commerce said last month ZTE made false statements to the department's Bureau of Industry and Security in 2016, during settlement negotiations and last year related to disciplinary actions it said it took against senior employees.

According to the department, ZTE actually paid full bonuses to employees that had engaged in illegal conduct.

"ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation." Ross said in a statement.

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