Facebook, Inc. (Nasdaq: FB) is in more hot water this week after the company said on Tuesday that it has ongoing data-sharing partnerships with Chinese device makers, one of which has been described by U.S. intelligence agencies as a national security threat.
Facebook stock traded lower by 1 percent on Wednesday morning, and analysts say the latest data-related headlines are only making the Facebook regulatory spotlight even brighter.
Earlier this week, Facebook admitted to data-sharing partnerships with a number of device makers, including Apple ( AAPL) and Microsoft Corp. ( MSFT). However, Facebook revealed on Tuesday that it has partnerships with a handful of Chinese device makers as well, including an ongoing partnership with Huawei.
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In February, the heads of the FBI the CIA and the NSA recommended American citizens not buy products made by Chinese companies Huawei and ZTE due to the potential for “undetected espionage.” The U.S. banned Huawei from bidding on U.S. government contracts in 2014. Arkansas Sen. Tom Cotton once described Huawei as “effectively an arm of the Chinese government.”
Facebook vice president of mobile partnerships Francisco Varela defended the partnerships in a statement.
“Huawei is the third-largest mobile manufacturer globally and its devices are used by people all around the world, including in the United States,” Varela said. “Facebook along with many other U.S. tech companies have worked with them and other Chinese manufacturers to integrate their services onto these phones.”
Facebook said it is ending many of its data-sharing partnerships and will be terminating its Huawei deal this week.
Huawei said it has never collected or stored Facebook user data, and Varela said user data was always kept on smartphone devices, never on Huawei servers.
GBH Insights head of technology research Daniel Ives says China-related headlines are bad news for Facebook investors.
“The last thing investors wanted to see this morning is a new Chinese data content/privacy issue come to light especially in the heat of the current political climate and negotiations between the US and China,” Ives says.
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Ives says Facebook and CEO Mark Zuckerberg have navigated the fallout from the Cambridge Analytica data scandal well up to this point, but the jury is still out on the Chinese data partnership news.
GBH Insights maintains a “highly attractive” rating and $225 price target for FB stock.
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China Adds to Facebook, Inc. (FB) Data Controversy originally appeared on usnews.com
