The irony in Cisco's dip in form

Cisco blamed the spying scandal for hitting its recent numbers but wasn't it meant to be Huawei that was the networking vendor suspected of espionage asks Billy MacInnes

Oh the irony! For some time now, certain people have been exercised by the fear Huawei is some kind of fifth column for the Chinese government through its alleged links to the Chinese military. They point to the fact the company was founded by ex-military officer Ren Zhengfei. Concerns have also been expressed in the US that Huawei’s equipment could allow the Chinese government and army to engage in cyber spying against the US.

In October 2012, a US House Intelligence Committee panel took those concerns a step further by describing Huawei as a “national security threat”. A review ordered by the White House found no concrete evidence to support the accusation but in July 2013 former head of the US national security agency (NSA) Michael Hayden claimed to be aware of hard evidence of back doors in the Chinese company’s equipment. Huawei has strongly denied the accusations.

The irony, given Hayden’s remarks, is that the recent revelations concerning the NSA’s own spying activities and the role (witting or unwitting) played by US companies in helping to provide information and data, seems to have affected the performance of Huawei’s biggest US rival, Cisco.

In a conference call with analysts accompanying a disappointing set of figures for its fiscal first quarter, Cisco CEO John Chambers acknowledged that the recent NSA revelations had “if you look at it, an impact in China”. How much? Sales were down 18% in China (the fall was worse in Russia, which was down 30%).

Rob Lloyd, Cisco’s sales head, admitted the NSA stories had caused customers “to pause” and given them “another issue to evaluate”. He argued “it’s not having a material impact but it’s certainly causing people to stop and then rethink decisions and that is, I think, reflected in our results”. Some people might wonder whether the two parts of that statement are potentially contradictory given that if there was no impact, nothing would have been reflected in the results.

Anyway, things appear to have come full circle from a situation where concerns about Chinese government spying affected Huawei sales to the US to one where fears of US government spying are potentially affecting Cisco sales to China.

Another irony is that amid all the blind justifications of the NSA’s activities by politicians on the grounds of their national security implications, no one seems to have thought about the business implications of compromising or, at the very least, giving the impression of compromising, the integrity and security of data held by US corporations to their customers outside the US. After all, it’s in the national interest for US companies to prosper and one way to do that is to sell their products to markets outside the US.

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