What is behind Cisco’s apparent dramatic recovery in China?
December 10, 2015 4 Comments
Cisco Executive Chairman John Chambers has offered some very interesting comments to a Reuters reporter in Dubai. He said that Cisco’s business was up by 40% in China in the third quarter. This would reflect a very dramatic turnaround as Cisco’s business in China had been tumbling after the company became one of the main targets of China’s quest for “secure and controllable” technology (replacement with Chinese products) in the wake of Snowden cyberspying revelations. Reuters reported earlier this year that Cisco’s products were being pulled from government procurement lists. But the situation seems to have changed.
Chambers told Reuters: “We spent three years winning the trust of the Chinese government and if you watch most American companies, their businesses in China is down dramatically, so was ours for several years. Do you know how much we grew in China last quarter? Forty percent.”
In June, various news reports said that senior Cisco executives in China had been removed. Then the company announced plans to invest $10 billion in Chinese high tech industries. This was part of a MOU signed with the National Development and Reform Commission in which Cisco agreed to cooperate with Chinese firms and government entities to enhance Chinese innovation, R&D, tech investments and job creation.
During President Xi Jinping’s recent US visit, Chambers was present for the Seattle tech confab and photo opportunities with President Xi. The company had earlier announced a $100 million joint venture with its leading local competitor, the Inspur Group. Inspur is said to hold 51% of the equity. Sun Pishu, the CEO of Inspur, was a member of President Xi’s delegation. The joint venture involves hardware and software development and Inspur reselling Cisco’s equipment in China. In July, Inspur had announced it would invest RMB 10 billion to build seven core cloud computing centers and 50 regional cloud centers in China.
So, is the spike in Cisco’s sales in China a result of selling equipment through — and to — a local competitor which is also investing huge money in cloud computing centers? Foreign tech leaders are finding themselves walking down winding paths to do business in Chinese these days.
This post originally appeared on LinkedIn.