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impactlab_2013 00184.txt

#Fallout from NSA leaks hurting U s. tech sales in China Beijing#has mistrusted long foreign technology companies and the Snowden revelations have exacerbated those concerns. The fallout from the U s. spying scandal is starting to take its toll as U s. technology companies including Cisco systems Inc and IBM Corp are facing unprecedented difficulties selling their goods and services in#China.####Cisco said on Wednesday that its revenue would drop 10 percent this quarter, and continue to contract until the middle of 2014, in part due to a backlash in#China#against revelations about#U s. government surveillance programs worldwide.####The#U s. government#isn t doing any favors for Cisco, ##said Evercore Partners analyst#Mark Mckechnie, after the company s shares fell 10 percent in late Trade in June, former#National security agency#contractor#Edward Snowden#revealed the spy agency had hacked network backbones around the world to gain access to sensitive information. The leaks provoked a storm in the Chinese media and added urgency to#Beijing s efforts to use its market power to create indigenous software and hardware capabilities, analysts and businessmen say.####This is all about#China#using its own technology, and#China#building leading technology companies,##said#James Mcgregor, chairman for Greater#China#at consultancy APCO Worldwide. In a call with analysts, Cisco Chairman John Chambers said Cisco ##and our peers##were facing##challenging political dynamics##in#China. One of those peers, IBM, reported in October a 22 percent drop in#China#revenue, leading to a decline of 4 percent in third-quarter profit for the world s biggest technology services company. IBM Chief Financial officer Mark Loughridge attributed the company s problems to the##process surrounding#China s development of a broad-based economic reform plan##which caused state-owned enterprises and governments to delay purchasing. The company subsequently reassigned the head of its growth markets unit. IBM declined to comment for this story. FOREIGN COMPANIES MISTRUSTED Beijing#has mistrusted long foreign technology companies, #China#executives said, and the Snowden revelations have exacerbated those concerns. Although#Beijing#has prohibited not state firms from purchasing Western-made technology services and equipment, the government has sent a clear message to chose Chinese-made equipment first, #China-based executives say.####While a formal document hasn t been issued, in the future we will try to buy IT equipment from domestic brands, such as Lenovo,##said a person familiar with technology purchases at one of#China s four big state-owned banks.####The government s signal is pretty clear they want to rely less on U s. products, such as IOE (IBM, Oracle and#EMC#Corp,##said a former#China-based telecommunications executive. Beijing#is focused especially on security for government, energy, transport, and finance networks. In August, the#National Development and Reform Commission,#China s top economic planning body, published a statement setting cybersecurity standards for financial institutions, cloud computing and big data, information system secrecy management and industrial controls. Four domestic software and hardware makers, including#China National Software & Service Co.,announced this month they have received a##top-tier##rating from the#Ministry of Industry and Information technology. China National Software s share price has gained nearly 250 percent since Snowden first revealed the existence of the NSA s clandestine#data mining#program in June. LONGSTANDING RIVALRY##We hope and demand that relevant foreign companies respect#China s laws, ##Chinese Foreign Ministry spokesman Qin Gang said on Thursday, when asked about Cisco s woes.####At the same time, as the#Chinese government#we of course have an obligation, a responsibility, to protect the country s security.####Cisco s problems in#China#have been particularly severe due to the#San jose,#California-based company s longstanding rivalry with Huawei technologies Co Ltd, which has faced stiff political opposition to selling equipment and buying companies in the U s. telecom market. In October 2012,#Mike Rogers#and Dutch#Ruppersberger, the chairman and ranking member of the#House Intelligence Committee, urged U s. companies to stop doing business with Huawei, the world s second -biggest telecom equipment maker, and a second Chinese vendor,#ZTE#Corp, citing security concerns. Snowden s revelations have reverberated in other big emerging markets such as#Brazil#Mexico#and#India. Chief Financial officer Frank Calderoni said#China#was where Cisco was affected most by a political backlash, but noted that it was difficult to quantify how much of its revenue shortfall was due to politics versus macroeconomic trends.####Between economic and political issues that are occurring in emerging markets we had a significant impact, ##Calderoni told Reuters in an interview. China-based executives say that the impact of#China s localization drive was expected to be uneven in the months and years ahead. For telecommunications equipment, for example, domestic carriers will look to buy products from Huawei and#ZTEOVER#Sweden s Ericsson or Cisco, the former telecoms executive said. Huawei, too, is making rapid progress in its server business, with shipments jumping 258 percent in the second quarter. IBM saw its market share shrink to 13 percent from 18 percent, during the same period, according to Jefferies LLC. Huawei now is the second-biggest server vendor in#China s double-digit growing market, behind Dell Inc, which retains a market share of 23 percent but is growing at a rate beneath the market s 15.4 percent pace. For other hi-tech products, including chips and database solutions, #China#will need more time before its products will be competitive.####Everyone is feeling the heat from the NSA revelations, ##said a former employee at a major multinational technology firm. The important point, however, was that companies like IBM don t have competitors for their high-end equipment, the expert added.####If they don t buy from IBM they can t buy from anyone else.####Photo credit: Reuters Via Business Insider Share Thissubscribedel. icio. usfacebookredditstumbleupontechnorat a

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