June 7, 2018

Maynard firm's largest customer allowed back into U.S. commerce after $1.4B settlement

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

Maynard telecommunications component manufacturer Acacia Communications opened Thursday's trading with a 4.25-percent gain after the U.S. announced a deal to allow its largest customer back into U.S. commerce.

ZTE, a China telecommunications giant and maker of smartphones, accounted for more than 30 percent of the company's revenue in fiscal 2017, and more than 20 percent in this year's first quarter.

U.S. Secretary of Commerce Wilbur Ross announced Thursday morning a $1.4-billion settlement with ZTE. That's in addition to $892 million the company has already paid in penalties

The $1.4 billion must be paid before the U.S. Commerce Department's Bureau of Industry and Security takes ZTE off a denial list.

ZTE was sanctioned in April, hit with a seven-year ban on exporting American products after the U.S. Department of Commerce determined the company failed to live up to a March 2017 agreement. The 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.

After the sanctions were announced, Acacia's shares fell nearly 36 percent, and the company said it could lose between $7 million and $13 million in the second quarter.

In addition to the hefty fine, ZTE has agreed to retain a special compliance team selected by the Commerce Department to monitor the company's compliance with U.S. export control laws, Ross announced.

ZTE must replace its entire board of directors and senior leadership for both of its business entities. ZTE and the U.S. agreed to a 10-year suspended denial order the U.S. can activate in the event of any violations during that period.

After the open of trading Thursday, Acacia's stock leveled out and eventually fell back down to $33.41 per share by 1 p.m., lower than the $33.87 at Wednesday's close.

Read more

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