NSA Spying Is Freezing Cisco, Google And Other Companies Out of Trillion Dollar Global Market


The good news today is Cisco‘s new focus on the Internet of Things, which I have been reporting as the new Mega Global Market War.  But frankly, the damage to U.S. companies like Cisco Systems by the NSA spying scandal has been catastrophic. Not only Cisco, but Google’s strategy to become a global Internet Service Provider, Yahoo, and Facebook are all affected. Cisco’s political problem is an exact mirror image of the problems Huawei has had with suspicions of espionage. Google’s strategic initiative to expand as a global ISP has hit major foreign government snags, most notably recently in India, where Gmail has been banned for government employees.

Read more: New Global Mega Industry Battle Developing in the Internet of Everything

Bill Gates was asked directly today about the potential damage from the NSA revelations, while visiting ResearchGate in Berlin.  Many knowledgeable Internet observers are predicting a severe “balkanization” of the Internet. This means that in reaction to the NSA scandal, countries all over the World will build national border walls to the Internet, destroying the original intent of the Internet as a free and open global network.  Gates answer today claimed that only China had erected serious national barriers to the Internet, and that China’s scientists were not restricted.  I think Gates is “whistling the graveyard.” Personally, I am already seeing strong blowback against Google in India and elsewhere precisely due to the NSA problem. I have reported on Eric Schmidt’s scathing criticism of the NSA in response. United States leadership in a free and open global Internet has been severely damaged.

Read more: Why Bill Gates Doesn’t Fear Internet “Balkanization”

BLOWBACK

Cisco’s disastrous quarter shows how NSA spying could freeze US companies out of a trillion-dollar opportunity

By Christopher Mims @mims 7 minutes ago

Bellwether Cisco indicates American tech companies are no longer welcome in Russia and other emerging markets. AP Photo/Lee Jin-man

Cisco announced two important things in today’s earnings report: The first is that the company is aggressively moving into the Internet of Things—the effort to connect just about every object on earth to the internet—by rolling out new technologies. The second is that Cisco has seen a huge drop-off in demand for its hardware in emerging markets, which the company blames on fears about the NSA using American hardware to spy on the rest of the world.

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Cisco chief executive John Chambers said on the company’s earnings call that he believes other American technology companies will be similarly affected. Cisco saw orders in Brazil drop 25% and Russia drop 30%. Both Brazil and Russia have expressed official outrage over NSA spying and have announced plans to curb the NSA’s reach.

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Analysts had expected Cisco’s business in emerging markets to increase 6%, but instead it dropped 12%, sending shares of Cisco plunging 10% in after-hours trading.

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This completely unexpected turn, which Chambers said was the fastest swing he had ever seen in emerging markets, comes just as Cisco is trying to establish itself as a bedrock technology provider for of the internet of things, which industry analysis firm IDC says will be an $8.9 trillion market by 2020. This quarter Cisco unveiled the nPower chip, a super-fast processor designed to funnel the enormous volumes of data that the internet of things will generate. Cisco also announced the Network Convergence System, a handful of routers that will use the nPower chip.

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Arguably, the current shift in the underlying infrastructure of the internet makes Cisco and other American companies uniquely vulnerable. The move to cloud services, streaming video and machine to machine communication (i.e., the internet of things) means new standards and new default hardware providers are taking root, and if NSA spying keeps American companies from dominating the market at an early stage, it could mean that in the long run they’ll simply be locked out of the

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4 Comments on “NSA Spying Is Freezing Cisco, Google And Other Companies Out of Trillion Dollar Global Market”

  1. Louis Savoie November 14, 2013 at 09:12 #

    I am not surprised that there would be “blow back” from the NSA fiasco initially. I think business for equipment manufacturers will recover as long as they continue to innovate, but this could hit the “global cloud service” providers more than equipment vendors. Organizations could take measures to protect their domain, but feel exposed when putting their business on someone else’s cloud infrastructure sitting who knows where and subject to that country’s laws (eg. Patriot Act).

    I think that part of the problem Cisco is starting to experience is real competition which is putting pressure on their top line and bottom line. Companies like AVAYA, HP and Juniper all have very good networking equipment at much lower prices with better support terms / warranties. The economy hasn’t really picked up yet and business are looking to have their money go farther which is opening the door to look at alternatives.

    • David Mayes November 14, 2013 at 09:43 #

      Cisco’s political problem is an exact mirror image of the problems Huawei has had with suspicions of espionage. Google’s strategic initiative to expand as a global ISP has hit major foreign government snags, most notably recently in India, where Gmail has been banned for government employees.

  2. Fone Star November 26, 2013 at 09:36 #

    Here’s a company that went off for the past year requiring onerous compliance and draconian disclosure agreements of their customers, representatives, technicians and more. And it turns out they violated ALL of their customer’s trust by allowing illegal access by the NSA. All I hear coming out of Chamber’s mouth and the American media is that this is somehow not a big deal and will blow over? Better think again, when trust is gone it is gone forever.

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