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

Tyler Durden's picture


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?

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Tue, 05/27/2014 - 07:38 | 4797755 Headbanger
Headbanger's picture

Way to go NSA!

Because Obama!

Tue, 05/27/2014 - 08:05 | 4797804 eurogold
eurogold's picture

The war with China has finally and officially begun !

Tue, 05/27/2014 - 08:13 | 4797819 kliguy38
kliguy38's picture

China has been planning and preparing for years for this transition......the real reason that gold and silver is supressed is to return bullion to China and has been negotiated since early 2006 with Treasury

Tue, 05/27/2014 - 09:17 | 4798015 Son of Loki
Son of Loki's picture

Tough luck China...we don't need that $50 trillion dollar business with 1.3 Billion chinese consumers anyway....


oh, wait a sec.....

Tue, 05/27/2014 - 09:38 | 4798058 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

Thankfully, America doesn't make much to sell to China... except for no-good paper certificates and soybeans.

Tue, 05/27/2014 - 10:03 | 4798137 Döwnner
Döwnner's picture


America also has chlorine-washed genetically modified chicken meat to sell.

Adt also geneticaly modified corn seeds.

And fat-porn (soory, Eastern Europeans do slim&sexy porn).


What else?

Ah yes, freedum and demonocracy.

And gay rights. Oh yeahh, shouldn't forget legalized corruption by simply lobbying.


Yes. America. Feels great to be an 'merikan.

Tue, 05/27/2014 - 10:05 | 4798148 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The moment any US based multi-national sends their manufacturing to China that product is torn apart and all IP is stolen. Local manufacturers can make cheaper, acceptable versions for the own use. Why do they need IBM now? CEOs are just stupid these days.

Tue, 05/27/2014 - 10:12 | 4798170 James_Cole
James_Cole's picture

Who needs big blue when you have truly brilliant long term plays like KING, TWTR, FB & NFLX? Those four companies alone will keep the US economy strong into perpetuity. 

Tue, 05/27/2014 - 10:13 | 4798172 gmrpeabody
gmrpeabody's picture

FX war spilling into a trade war, soon to be a shooting war...

Tue, 05/27/2014 - 10:45 | 4798287 old naughty
old naughty's picture

b,b,but they still have not told wal-mart to FO.

Tue, 05/27/2014 - 11:01 | 4798355 Herd Redirectio...
Herd Redirection Committee's picture

What happens if China no longer wishes to hold USD as reserves, any one?

Tue, 05/27/2014 - 12:39 | 4798758 Leraconteur
Leraconteur's picture

Belgium will step up and fill in.

The Chinese can only dump and deny ONCE. After that they played that card.

Tue, 05/27/2014 - 15:39 | 4799323 macholatte
macholatte's picture


“China doesn’t need the U.S. companies in the way it did for the last few decades.”

No shit!
China has learned how to mass produce everything and do it well. It was taught by the best, the Americans. Now, as it prepares for war with the “West” it is setting itself up to be self reliant. It will not need anything “American” to run its machine while Europe and the USA will need everything made in China.

How many TV and computer monitors are there in all the ships and aircraft in the US Navy?  How many of them are manufactured in the USA?

"The Capitalists will sell us the rope with which we will hang them."
– Vladimir Ilyich Lenin

Tue, 05/27/2014 - 11:25 | 4798454 Renewable Life
Renewable Life's picture

I love this talk of shooting war! Yes if you mean skermishes, but China or Russia have NO long or short term interest in a large scale military engagement with America!
We are Rome, they see themselves as the "New Americas" circa 1778!!

They have watched VERY closely as we couldn't occupy a phone booth in Iraq and Afganistan without losing men and treasure daily, so they know we won't be "holding any Chinese or Russian territory"!! So sail and fly around in your shiny equipment all you want, but China and Russia have new global empires to build!!

Tue, 05/27/2014 - 10:43 | 4798280 tony wilson
tony wilson's picture

i likes chlorines

i likes chickens

whats yer beef?


Tue, 05/27/2014 - 11:15 | 4798404 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

My apologies, I forgot about those fantastic American products.

Also... please allow me to take soybeans off the list, since China would rather buy from Brazil and Argentina when given the same price.

Tue, 05/27/2014 - 15:18 | 4799235 Flagit
Flagit's picture

Do stockholders (cant believe I'm rooting for them) of Cisco, Microsoft, and IBM have a case to recover fiscal damages? I mean, if a movie studio can sue Kim Basinger for what a movie could have made, do the stockholders have a similar claim against the NSA?

Tue, 05/27/2014 - 10:21 | 4798199 Kirk2NCC1701
Kirk2NCC1701's picture

IBM banned?  Well, finally some good news for its arch-rival HP.  No NSA-ware on their servers, right?

Oh, wait...

Tue, 05/27/2014 - 08:14 | 4797820 Smegley Wanxalot
Smegley Wanxalot's picture

The more things hopeNchange, the more they stay the same.

Tue, 05/27/2014 - 08:32 | 4797867 what's that smell
what's that smell's picture


comet hits the earth...bullish (ask krugmanites why broken glass is so important); comet misses the earth...bullish (vix fix).

sun burns out....bullish (build underground civilization near the hot core); sun blows up....bullish (build a new sun).

game theory for dummies.

Tue, 05/27/2014 - 09:40 | 4798075 PT
PT's picture


It's a silent 't'

Tue, 05/27/2014 - 07:42 | 4797764 JustObserving
JustObserving's picture

Chinese do not approve of free backup of their data by the NSA?  

Tue, 05/27/2014 - 07:50 | 4797780 Dr. Engali
Dr. Engali's picture

This hope and change gets better and better every day.

Tue, 05/27/2014 - 08:12 | 4797818 TheFourthStooge-ing
TheFourthStooge-ing's picture

Damn the icebergs, full speed aground!

Tue, 05/27/2014 - 08:49 | 4797834 intric8
intric8's picture

'hoping' for 'change' with this bullshit administration! I hope obozo is happy, sanction power tripping like a crack smoking bolshevik and  causing countries to proceed further into economic, class and societal decline. Will he be happy when international trade ceases altogether and millions start starving to death? Insipid man! Insufficient bastard of a president

Tue, 05/27/2014 - 09:37 | 4798061 redd_green
redd_green's picture

you got more than a screw loose if you think its all due to Obama.

Tue, 05/27/2014 - 10:16 | 4798185 gmrpeabody
gmrpeabody's picture

Well..., he did ask for your vote with a promise to change it, remember.

Tue, 05/27/2014 - 10:22 | 4798203 MrPalladium
MrPalladium's picture

Nevertheless, Obama is in a position to fix the problem if he cared to do so.

Tue, 05/27/2014 - 10:27 | 4798220 Max Cynical
Max Cynical's picture

"you got more than a screw loose if you think its all due to Obama."

He hasn't put a stop to it, has he?

Tue, 05/27/2014 - 11:00 | 4798354 intric8
intric8's picture

sorry, didnt know failing to provide you with a long list of shysters = 'screws loose'

Tue, 05/27/2014 - 07:42 | 4797765 Cognitive Dissonance
Cognitive Dissonance's picture

Replace IBM, the international Gold standard in mainframe computing? That does not compute. /sarc

Tue, 05/27/2014 - 10:48 | 4798300 TheReplacement
TheReplacement's picture

No.  They forgot to change the winter air out for summer air in the tires.

Tue, 05/27/2014 - 10:51 | 4798310 Oh regional Indian
Oh regional Indian's picture

I know a few smart Indians making really good money keeping AS 400's alive for Insurance and Banking world wide. Insane interfaces they work in, pre-historic.


Tue, 05/27/2014 - 15:15 | 4799227 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Most global banks would grind to a halt if the wrong 64-year old IT guy got hit by a bus

Tue, 05/27/2014 - 15:29 | 4799292 Flagit
Flagit's picture

I think i see the solution. Change the name slightly to confuse them. International China Business Machines.


Tue, 05/27/2014 - 07:46 | 4797771 Kina
Kina's picture

The demi-Oligarchs are going to be pestering the Oligarchs over this.

Tue, 05/27/2014 - 10:41 | 4798275 prains
prains's picture

yes but iNSA hasn't opened up their chat room yet

Tue, 05/27/2014 - 07:48 | 4797775 g'kar
g'kar's picture

“China doesn’t need the U.S. companies in the way it did for the last few decades.”


They've already stolen everything they need.

Tue, 05/27/2014 - 08:03 | 4797800 Anasteus
Anasteus's picture

Right. Pushing domestic banks to operate on local brand is the best thinkable impetus to develop machines much faster than IBM.

Tue, 05/27/2014 - 09:30 | 4798048 813kml
813kml's picture

China didn't need to steal anything, US corps gave everything away in the pursuit of higher profits.

Tue, 05/27/2014 - 10:01 | 4798133 PT
PT's picture

Yep.  Will they never learn?  Hate to drag it up again, but number 8:


Fool me once, shame on you.  Fool me twice, um... umm, aahhh, watch someone else get fooled, uhm, um, oh shit!  It happened again!  Oh yes, they got fooled but surely we can get away with it next time ... but they're soooo cheap!!! ... and no we can do it, they won't fool us ... damn! 

Tue, 05/27/2014 - 10:17 | 4798186 813kml
813kml's picture

I think it's amusing when people blame China for US woes, the US shot itself in the foot and then hung itself with its own belt.  China was opportunistic, but it's not hard to look like a chess grandmaster when playing against a toddler.

But make no mistake, China will be scapegoated for every US incompetency.

Tue, 05/27/2014 - 12:24 | 4798708 kchrisc
kchrisc's picture

Yes and no. China had nothing to do with the demise of the DC US, but the FedRes did.

The thieves of the FedRes stole everything from the American people while backed stopped by the violence of their DC US puppets.


"Banksters, pol and crats

Thieves, bullies and rats

Some day come no head for their hats."

Tue, 05/27/2014 - 11:19 | 4798435 WillyGroper
WillyGroper's picture

That was seriously funny! 

One would have to have worked for corporate to truly appreciate.

Tue, 05/27/2014 - 12:03 | 4798641 DaveyJones
DaveyJones's picture

China steals some technology

we steal everything else

Tue, 05/27/2014 - 09:46 | 4798092 Raging Debate
Raging Debate's picture

g'kar - There is that but from a bigger perspective trade between the countries had to normalize. Both will rattle sabers and conduct protectionist policies for the next several years. However, I don't think trade will decrease drastically.

Last, there hasn't been much in terms of innovation here in the last few years that is compelling for them to continue to buy our hardware or software. Windows 8?!? If IBM's offerings are on par with that...

The NSA wouldn't factor into cost if I was on the Chinese end it is value or not.

Tue, 05/27/2014 - 07:49 | 4797777 observer007
observer007's picture

Thats the reason:

Obama wants new world order 2014


See video here (speech from yesterday)

Tue, 05/27/2014 - 08:22 | 4797847 StateofFraud
StateofFraud's picture

Video out of context. Misleading and trollish.

Tue, 05/27/2014 - 08:57 | 4797961 NidStyles
NidStyles's picture

Can we get rid of this guy Tyler? He's just spamming his site.

Tue, 05/27/2014 - 11:10 | 4797990 Anasteus
Anasteus's picture

"Ordinary men and women are too small minded to govern their own affairs."

Hm, when did I hear similar words like those?.. Ah, I remember, during my communist youth. Arrogant and conceited puppet who has NEVER governed his own affairs.

No, the video, if genuine, is NOT out of context, it's a serious thing. It's an open declaration and public defense of tyranny. In such a case China can do the only reasonable thing it can, to completely cut off from the surveillance network and get rid of western technical infrastructure as an important part of it.

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