ZTE CEO to Quit in US Export-Ban Dispute
Three senior ZTE executives, including CEO Shi Lirong, are set to announce their resignations in the wake of the Chinese vendor's run-in with the US Commerce Department, according to a report from the Wall Street Journal.
The management reshuffle appears to be an effort to placate the US authorities, which recently hit the company with a damaging export ban.
The US Commerce Department introduced that ban after accusing ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) of violating sanctions on Iran, but it was temporarily lifted in late March following reports of "constructive" negotiations between ZTE and US officials. (See US Lifts ZTE Export Ban – Report, ZTE: What On Earth Were They Thinking? and ZTE Faces Trade Restrictions Over Iran Links.)
Those negotiations now appear to resulted in the departure from ZTE of senior executives responsible for sanctions violations, according to the WSJ report, which cites sources familiar with the matter.
Besides Shi Lirong, who has led ZTE since 2010, they include executive vice presidents Tian Wenguo and Qiu Weizhao, the WSJ reports.
Current Chief Technology Officer Zhao Xianming is expected to be appointed as the new CEO. According to the WSJ, he is also set to be named as chairman.
Tian and Qiu are said to have been involved in ZTE plans to set up so-called "shell companies," allowing them to ship products to Iran while evading US authorities.
As previously reported by Light Reading, the export ban will have made it difficult for ZTE to obtain hardware and software developed by US authorities, with ramifications for the Chinese vendor's supply chain.
ZTE obtains components from US technology players including IBM Corp. (NYSE: IBM), Intel Corp. (Nasdaq: INTC), Microsoft Corp. (Nasdaq: MSFT) and Qualcomm Inc. (Nasdaq: QCOM), which also stood to lose business while the ban was in force.
The ban was an even bigger threat to a collection of smaller US optical component firms, as noted in a blog from Electric Speech, which covers mainly China-related telecom issues.
It also prompted ZTE to delay the publication of its annual report, which was due to appear in March but will now be released this week. Shares in the company have not traded in Hong Kong since news of the ban first broke.
In January, ZTE indicated that it expected net profit in 2015 to have risen by 43.5%, to 3.78 billion Chinese yuan (US$584 million), with sales rising by 23.8%, to RMB100.8 billion ($15.6 billion). (See ZTE Set to Report Profit Hike for 2015.)
According to a separate report from Reuters, a ZTE spokesperson told that publication the forthcoming management shake-up was nothing out of the ordinary, pointing out that ZTE reshuffles its management every three years.
Larger Chinese rival Huawei Technologies Co. Ltd. , which appointed a new acting CEO under its "rotating CEO" system last week, saw net profit increase by one third in 2015, to RMB36.9 billion ($5.7 billion), with sales up 37%, to RMB395 billion ($61 billion). (See Huawei Profits Soar Despite Forex Hit.)
— Iain Morris, , News Editor, Light Reading