HONG KONG (Reuters) - Shares of ZTE Corp (0763.HK) (000063.SZ), the world’s fifth-largest telecommunications maker and the fourth-biggest handsets maker, hit a nearly 3-1/2-year low after rumors of job cuts added to a spate of negative news involving the company.
Chinese media reports said ZTE had planned to axe as many as 10,000 jobs this year as a slew of overseas employees return to China due to weak markets abroad. However, ZTE has denied it.
“ZTE is not planning any lay-offs this year and thousands of college graduates will join the company to work in R&D jobs, etc,” ZTE said in an emailed statement.
“The company is also committed to building up local employment in overseas markets, and continues to hire experienced local staff,” it said.
ZTE’s Hong Kong-listed shares, which have been falling sharply for three consecutive trading sessions, hit an intraday low of HK$9.95 in morning trade on Wednesday, the weakest level since March 3, 2009. By the lunch break, its shares erased some losses to trade 2.9 percent lower at HK$10.00.
ZTE shares, down nearly 60 percent in value this year, have been hit by the Shenzhen-based company’s profit warning and an investigation by the FBI on the sale of banned U.S. computer equipment to Iran.
ZTE said its profit in the first half of 2012 would fall by 60-80 percent from a year earlier due to lower gross margins, foreign currency exchange losses and domestic operator networks, such as China Mobile, postponing their tenders.
The profit warning has prompted many brokerages to downgrade their ratings and target prices for the company.
“We made a mistake in the timing of our forecast and upgrade as we were overly focused on the earnings contribution from real-time contracts signed, while neglected the time lag (typically 6 months) between signing and results being delivered,” Chinese brokerage CICC said in a report.
The European Union is also probing the company and its crosstown rival Huawei Technologies Co Ltd HWT.UL on possible illegal subsidies they received from the Chinese government.
On Tuesday, China’s Ministry of Commerce said it hoped ZTE would receive fair and proper treatment from the United States.
The U.S. investigation stems from a Reuters report in March that ZTE sold Iran’s largest telecoms firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications.
ZTE said it had not been contacted by the FBI and was cooperating with the U.S. commerce department, but declined to provide details.
Reporting by Lee Chyen Yee; Editing by Jacqueline Wong