Acacia Communications (ACIA) came in spotlight earlier this week right after U.S regulators decided to ban domestic companies from selling any software or hardware components to China’s ZTE. The news was relevant for Acacia as it generated about 30% of its revenue last year by selling networking gear to the Chinese telecom giant. Naturally so, shares of the U.S-based networking hardware provider plunged by as much as 33% shortly after the decision was made public. But unfortunately, the pain could still continue for long-side investors. There is reason to believe that shares of Acacia could fall further.
ZTE Dependence
Let me start by saying that Acacia doesn’t necessarily have a diversified client base. The networking solutions provider may enlist several prominent companies as its customers in its 10Q filings, but the ground reality is that it generates the bulk of its revenue by selling networking hardware to a few firms.
