US tech firms to see China business dip amid NSA scandal

Cisco Systems, IBM, and Microsoft are expected to encounter problems touting their products in China over revelations concerning the U.S. government's surveillance programs. Cisco is hardest hit.
Written by Cyrus Lee, Contributor

U.S. technology companies including Cisco Systems, IBM, and Microsoft are expected to encounter problems touting their wares in China, due to revelations of the U.S. government's surveillance programs. 

As far as major U.S. IT companies are concerned, so far, Cisco is bearing the brunt of the backlash, according to Jim Lewis, a senior fellow with the Center for Strategic Studies in Washington, who is an expert on China and the IT industry. Citing his comments, a Reuters report Thursday noted that Cisco's stock price slumped 11 percent a day after it warned its revenue could drop as much as 10 percent this quarter and it expected losses to continue through mid-2014. 

The networking giant attributed the gloomy prospects partly to the backlash in China, after reports emerged the U.S. government--via the National Security Agency (NSA)--had conducted numerous spying exercises, including monitoring the phones of 35 world leaders.

IBM in October also reported a 22 percent revenue decline in China, leading to a 4 percent drop of its third-quarter profit. Microsoft executives also singled out China as the company's weakest performing market in the world during the September quarter, according to Reuters.

In the report, Lewis said Beijing might be targeting Cisco in particular as retaliation for Washington's directive to ban goods from Chinese networking vendors including Huawei Technologies. The U.S. government had accused Huawei, currently the world's largest telecommunications equipment maker, of posing a threat to its national security due to the company's "military background". Another Chinese telecom giant, ZTE, was highlighted for its close relationship with the Chinese government. The U.S. House Intelligence Committee had expressed concerns the Chinese government might tap these telecoms intermediaries to hack or attempt to breach U.S. networks.

However, Cisco's smaller network equipment rival, Juniper Networks, had indicated it was not experiencing any impact from the U.S. spying scandal. Juniper CMO told Reuters its business "continues to grow in Asia-Pacific as well as China".

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