With evidence mounting that NSA spying has damaged the business of some of the largest U.S. technology companies, the question now is how long it will take them to win back the trust of overseas customers.
Without any changes in U.S. law that restrict the agency's ability to use tech for surveillance, the answer may be "never."
That may be the case in China, where IBM, Microsoft, Hewlett-Packard and, most notably, Cisco Systems have reported substantial drops in sales since the NSA surveillance program came to light.
Sales are falling for several of these giants, not only in China but in other parts of Asia and other developing economies, too, and the trend may have as much to do with privacy concerns as with the pace of global economic growth.
Cisco, whose switches and routers lie at the core of Internet traffic around the globe, saw its top five emerging markets post year-over-year order declines between 18% and 30% in its most recent quarter.
"It was pretty brutal," Cisco CEO John Chambers said on a conference call last month.
Chambers was hesitant to blame security concerns for the company's performance worldwide.
He called the impact on the company's total emerging markets business "fairly nominal," and pointed to macroeconomic uncertainty and the introduction of new products that overseas customers are cautious about investing in.
"I do think we're seeing a slowdown in their decision-making, and in their economies," Chamber said on the call. "I do not think (privacy) is the major factor across all emerging markets. I do think it is a factor, however, in China."
It's true that this year, Cisco has been rolling out new, expensive switching and routing platforms, trying to sell expensive gear to foreign phone companies, large businesses and governments just as the NSA revelations were disclosed.
The technology transition is proving to be a tough sell for the company, because it's hard to alleviate customers' security concerns if they believe Cisco's gear has a backdoor that enables NSA snooping -- especially when one of Cisco's selling points has been that its equipment is secure.
While Chambers was careful to parse his words on the effect of those concerns, another Cisco executive on the conference call last month went a bit further.
"The issue has caused a number of customers to pause and re-evaluate," said Robert Lloyd, the company's president and head of sales, adding, "It's not having a material impact, but it's certainly affecting decision-making" in emerging markets, which make up a fifth of the company's sales. (continued...)
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