Lumentum et al. Plunge on DoJ Huawei Probe; Ciena's Gain?

Lumentum et al. Plunge on DoJ Huawei Probe; Ciena's Gain?

According to the Wall Street Journal, the U.S. Department of Justice is investigating Chinese phone manufacturer and network supplier Huawei. Today's report says that the Justice Department investigation deals with allegations that Huawei violated US sanctions against Iran.

Recently Sen Liz Cheney introduced a bill into Congress that would prohibit the US Government or any contractors working for it to use electronics from Huawei or from another Chinese company ZTE Corp. The company is said to have been illegally exporting United States technology to North Korea and Iran, once caught, the company failed to discipline the staff members associated with the exports.

The U.S. government's investigation into sanctions violations by ZTE following reports by in 2012 that the company had signed contracts to ship millions of dollars' worth of hardware and software from some of the best-known U.S. technology companies to Iran's largest telecoms carrier.

The Journal report gave no details about the investigation.

Schloss, the Huawei spokesman, said those allegations aren't true.

Such a probe raises the stakes for Huawei, which is facing a series of actions by Washington to diminish the company's already limited business dealings in the U.S. It could also have spill over effects for its much larger business overseas, particularly in Europe and markets such as Australia where the Federal Government is considering a ban on Huewei supplied 5G networking gear. The company is also the world's No. 3 maker of smartphones.

We see Ciena (CIEN, $26.36, Buy), Infinera (INFN, 11.56, Hold), and possibly Nokia (NOK, $6.00, NC) as potential winners from any incremental sanctions against Huawei.

Huawei maintains research and development facilities in Texas, New Jersey, California and four other USA states, all of which provide technology for Huawei's global operations.

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