Cisco is trying to make things right with China after reports that the National Security Agency secretly used Cisco routers for spyware put a damper on the company’s Chinese sales.
Cisco incoming CEO Chuck Robbins and outgoing CEO John Chambers walked away from meetings with Chinese Vice Premier Wang Yang with a memorandum of understanding that says Cisco will invest billions to promote the development of a high-tech industry in China. The company said the $10 billion commitment will focus on areas of innovation, equity investment, research and development, and job creation.
Several Chinese partners are set to invest alongside Cisco, which has been doing business in the world’s most populous country for more than 20 years. In recent years, the company has faced increasing competition from China’s homegrown networking and telecom equipment companies, Huawei and ZTE.
China may soon be the largest market for networking gear, but Cisco’s share of that market appears to be sliding. During the most recent quarter, Cisco said sales in China were off 20% vs. the year-ago quarter. The sales slip is part of a trend for Cisco; during the previous three quarters Chinese sales were off 19%, 23% and 33%, respectively, for Cisco.
National security concerns on both sides of the Pacific may be to blame for the downturn. Chinese officials are well aware of the NSA’s alleged activities, and are also aware that the U.S. Congress has asked American telecom companies to not use equipment made by Huawei or ZTE in their networks.
Cisco’s outgoing CEO wrote a letter to President Obama expressing concern about the NSA’s activities, after reports showed the agency intercepting Cisco’s routers that were headed for China, and allegedly installing spyware into the devices.
