It appears that Cisco Microsoft and IBM are paying the price for the US government's addiction to spying on the Internet.
Now that the NSA has been revealed as the "Big Bad" of spying, the Chinese are starting not to trust US companies with their sensitive networks. This is mostly because the NSA was revealed to be working with local companies to install backdoors to allow for monitoring.
Ironically, this is the same thing that the US had accused Chinese comm companies, such as Hauwai, of doing and that is starting to look like a psychological projection.
Sadly for Cisco Microsoft and IBM , the networking companies appear to have been caught in the middle. Reuters reports that Cisco shares tumbled 11 percent a day after it warned that revenue could drop as much as 10 percent this quarter, and continue to contract through the middle of next year, in part due to a backlash in China after revelations about US government surveillance programmes.
Jim Lewis, a senior fellow with the Center for Strategic Studies in Washington, who is an expert on China and technology said that Cisco will bear the brunt of any concerns about spying. It was already in trouble because of Washington's refusal to buy goods from China's Huawei, but the spying allegations made matters worse.
IBM last month reported a 22 percent drop in China revenue, leading to a four percent decline in its third quarter profit. Chief Financial Officer Mark Loughridge claimed that the company's problems were due to the process surrounding China's development of a broad-based economic reform plan. Microsoft singled out China as the company's weakest performing area in the world and cited challenging macro conditions.
Beijing has not prohibited state firms from purchasing Western-made technology services and equipment, but has told them to look at Chinese-made equipment first.
This is good news for domestic brands, such as Lenovo, but as far as western companies are concerned things are going to get worse. Reuters said that the Chinese want to rely less on US products.