May 17, 2019

Acacia: Little impact to Chinese company restrictions

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

Acacia Communications of Maynard is complying with a U.S. Department of Commerce order imposing restrictions on doing business with Chinese telecommunications equipment and consumer electronics manufacturer Huawei Technologies, but the move isn't expected to be a significant hit to Acacia's revenues.

In fact, Acacia said its 2018 sales to Huawei were 1.5% of the year's total revenue and 1% of the company's first quarter revenue.

As a result, Acacia's share price took an initial hit of about 7%, but opened Friday trading on the Nasdaq up about 2%.

The Commerce Department on Wednesday said it added Huawei -- the largest telecommunications equipment provider in the world -- to the Bureau of Industry and Security's Entity List, for activities contrary to U.S. national security or foreign policy interest.

To do business with Huawei, companies must obtain a special license from the U.S., but that could be denied if that business is considered to be harmful to U.S. national security for foreign policy.

The restrictions come after the Chinese company is alleged in a federal indictment earlier this year to have done business with Iran, a move violating U.S. sanctions against the country. The company faces federal charges for stealing trade secrets from T-Mobile.

In a Friday announcement, Acacia said it was taking steps to suspend business with the company and its affiliates. Acacia did not say if it would seek a license to do business with Huawei.

It's the second time in as many years a Chinese company and customer of Acacia has been sanctioned by the U.S. Last year, telecommunications manufacturer ZTE -- Acacia's largest customer -- was completely banned from doing business in the U.S., a move that drove down Acacia's stock price and revenue for several months of the year.

That ban was eventually lifted in June after ZTE paid a $1.4-billion fine and agreed to other measures.


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