[Cryptography] "completely unexpected" drop in Cisco's foreign revenues

ianG iang at iang.org
Mon Dec 1 08:46:55 EST 2014


Cisco’s disastrous quarter shows how NSA spying could freeze US 
companies out of a trillion-dollar opportunity
Bellwether Cisco indicates American tech companies are no longer welcome 
in Russia and other emerging markets.(AP Photo/Lee Jin-man)

Written by
Christopher Mims at mims
November 14, 2013

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.

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.

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.

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.

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 these 
markets while competitors like Huawei and ZTE reap the benefits.

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