First Cisco And Microsoft, Now IBM: China Orders Banks To Remove High-End IBM Servers

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First Cisco And Microsoft, Now IBM: China Orders Banks To Remove High-End IBM Servers (ZeroHedge, May 27, 2014):

A week ago, in retaliation to the inane charges lobbed by the US accusing 5 Chinese army officials of spying on US companies (when the NSA spying scandal on, well, everyone refuses to leave the front pages), China announced it would ban the use of Windows 8 on government computers (considering the quality of Windows 8, this is likely a decision government computers would have taken on their own regardless). Today, China has expanded its list of sanctioned companies from Microsoft to include IBM as well, following a Bloomberg report that the Chinese government is pushing domestic banks to “remove high-end servers made by International Business Machines Corp. and replace them with a local brand.

Why is MSFT and now IBM sowing the seeds of the US government’s stupidity and failed attempts to distract from its own spying scandals? We don’t know. Here is what we do know:

Government agencies, including the People’s Bank of China and the Ministry of Finance, are reviewing whether Chinese commercial banks’ reliance on IBM servers compromises the country’s financial security, said the four people, who asked not to be identified because the review hasn’t been made public.

The review fits a broader pattern of retaliation after American prosecutors indicted five Chinese military officers for allegedly hacking into the computers of U.S. companies and stealing secrets. Last week, China’s government said it will vet technology companies operating in the country, while the Financial Times reported May 25 that China ordered state-owned companies to cut ties with U.S. consulting firms.

Harriet Ip, a Singapore-based spokeswoman for IBM, referred questions to IBM in the U.S. Jeffrey Cross, a Somers, New York-based spokesman, didn’t immediately respond to an e-mail seeking comment outside U.S. business hours.

“Security trumps everything,” said Duncan Clark, chairman of BDA China Ltd., a Beijing-based consultant to technology companies. “China doesn’t need the U.S. companies in the way it did for the last few decades.”

Perhaps somewhat ironically, IBM sold its low-end server business to Lenovo, itself a part of IBM once upon a time, several months ago for $2.3 billion.

But if this wasn’t enough of an insult to IBM’s top line, here is another concern about IBM margins: China simply believes Big Blue’s products are too expensive:

In addition to concern about Armonk, New York-based IBM’s equipment as a security threat, China’s government also believes IBM servers are more expensive in China than in other regions, the people said.

China Postal Savings Bank Co. is using servers made by Jinan-based Inspur Group Ltd. as part of a trial program that began in March 2013, the people said. The government plans to expand that trial to other banks, they said. The group’s Inspur International Ltd. unit gained 10 percent to HK$1.53 at 2:57 p.m. in Hong Kong trading today. In Shenzhen, Inspur Electronic Information Industry Co. rose 4.7 percent.

That’s ok though: since news and fundamentals don’t matter, we fully expect IBM stock to also be up several percent on what now appears to be the terminal loss of one of the company’s largest export markets. And not only IBM: other stocks set to surge on this bad news are MSFT and, of course, Cisco, whose CEO was recently crying about Obama’s NSA policies, and whose sales in China are once again assured to crater. But as they say in the movies: tis but a scratch – who needs top line growth when a company can issue debt to buy back its share and pretend all is well?


1 thought on “First Cisco And Microsoft, Now IBM: China Orders Banks To Remove High-End IBM Servers”

  1. The chess player is making moves against the west. After cutting the US dollar from 50% of the world economy, now it is attacking the lack of honesty and credibility that the US reeks from………scaring the smaller financial players into fear the US might pull some dirty tricks on them, too.
    Believe it or not, China is a small player, despite it’s amazing outward growth and so-called expansion…….it is all done on debt, their entire economy depends of exports, and their exports are dropping like a stone.
    Not only are other nations suffering from recessions and depressions, but Chinese credibility in its quality of MFG goods (especially foods) is suffering, and nobody wants food from there. Americans have stopped eating fish and chicken, partly from Fukushima, partly from the fact they are processed in filthy China.
    China’s debt to GDP is anywhere from 5-12X it’s actual income…..they lie about their income and GDP as they do everything else. Even worse, they have been caught lying about their exports repeatedly, yet continue to do so.
    The strongest player is Russia. Their debt to GDP is about 30%, the US is 99%, Germany is well over 200%, the UK is 450%…….the numbers are staggering.
    The quiet one, the one with more natural resources than any other nation is Russia. The one with the most drive for nationalization is…..Russia. Russia has more gold, oil, gas, and all sorts of good things people need for survival. It has kept a low profile these past few years, but it has not been idle.


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