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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Anasteus's picture

Well, it seems I took some wooden nickels... the video is indeed misleading, the sentence if out of context.

Congratulations Observer007 for cheating me successfully.

Dr. Engali's picture

Bullish for Chinese reverse engineered IBM clone servers.

JustObserving's picture

And the rest of the BRICS get cheap servers though with a new set of spyware.  Will Obama  let Silicon Valley continue to sell its most advanced chips to China so it can build cheap servers?  When will Obama indict the next 5 Chinese military hackers?  Trade wars and inflation are about to surge.

espirit's picture

Will prolly never know whether the 5 Chinese indicted were prying open the servers purchased from big blue.

Hacking is a matter of interpretation.

Winston Churchill's picture

Obozo's handlers must be getting punch drunk.The jabs just keep coming.

Just waiting on the upper cut and the coup de grace.

GetZeeGold's picture

 

 

Word is Jay Carney is getting combat pay now.

TheFourthStooge-ing's picture

.

Word is Jay Carney is getting combat pay now.

He deserves it. In addition to running the cotton candy machine, he is now also responsible for running the Tilt-A-Whirl ride.

espirit's picture

I thought he was the music grinder.

Dr. Engali's picture

Why do you say that? The media will ignore this too.

buzzsaw99's picture

trade war = bullish

Dubaibanker's picture

This is #deglobalization at its best.

In 2005, IBM sold its PC division to Lenovo...then IBM sold its x86 low end server division to Lenovo...then Lenovo bought Motorola from Google....now China owns most of IT company assets so it does not really need the US companies. 

Isn't this how buy and then conquer works?

TheFourthStooge-ing's picture

Hey, IBM is just focusing on groath in its core competency: stock buybacks.

813kml's picture

And HFT, but it looks like that "industry" is dying.  Maybe they should get heavy into BTC mining or World of Warcraft gold.  Coming quarter's profits might hinge on how well Watson does in the next Jeopardy tournament.

PT's picture

What?  Are you saying that if China internationally enforced patent law then they'd own all the computer technology?

 

 

Now I REALLY wish I'd finished my engineering degree and done further study.  Mind you, the extra debt probably would have killed me by now.

AGoldhamster's picture

Definitely bullish - even more reason to push stocks to da moon - BTFATH.

F-X's picture

This is kind of earth-shaking news. Top Cisco, Microsoft and IBM management must be shitting their pants. To lose a market like that because of your own government must be hard to stomach. Governments normally support their own industry in developing export markets. 

buzzsaw99's picture

spy vs spy = good for the eCONoME

orangegeek's picture

Really??

 

So China will just tear out all "American Stuff" and put - well - something else in its place.

 

Shouldn't take more than 5, maybe 10 minutes.

Dr. Engali's picture

Maybe you aren't paying attention, but that's exactly what they are doing.

F-X's picture

The concern fot IBM, MS and Cisco isn't that they will tear out the old stuff. It's that they won't buy any new stuff.

Pee Wee's picture

These "corporations" have sucked the Fascist tit dry in the USA.  Fascist Sam and his security paradise pay very, VERY well.  Government dirty work is very lucrative if one can get it so these companies sold their future for pennies.

Executives have thrown the baby out with the bathwater.  US tech is in a nose dive straight down -- soon it will be 3rd world tech you used to make fun of.   Perhaps the USA can dump IBM and get a little V-Tech toy technology.

The Bush cartel (Michael Hayden) hit the pedal to the medal to accelerate tech demise for the Fascist edge.

Still waiting in the wings is how Fascist-tech helped Fascist-finance screw everyone.   When do we get confirmation the banks had access to this technology, and usage was pervasive (and nothing to do with National [in]Security)?

Omen IV's picture

sure - but why did these companies cooperate? major market share everywhere at risk - this is not Chinese specific but world issue -

then this same condition can be applied to sanctions of individuals / companies with Russian origin (limit access to bank accounts) blow back is move accounts outside of US currency massively and Bank Intl. Settlements as crossroads - this  is all strange business logic for protection of "any" long term franchise

were they blackmailed into cooperating with NSA? Did they trade access overt  or "turn a blind eye to" for quid pro quo: espionage information on competitors?

seems you would want to be lilly white given especially move to the cloud for data storage  - especially - knew that was coming 15 years ago - guys like Chambers and Ellison a lot to lose - yet went along - bright guys clearly so how did they make the decision?

why would anyone expect it to be long term secret regardless of Snowden confirmation?

the decision process used is more intriguing than the results since potential effects are a sum certain - why?????? 

DR's picture

Did you really believe that China,the second largest economy in the world, was going to continually rely on the US to provide for it's data security? The US tech giants would have lost the China markets no what the US government did.

stant's picture

They are still trying to unring a bell while standing on a bomb.

orangegeek's picture

Maybe China could cut off their food imports from the US.

 

Funny how communists process - READY!!!  SHOOT!!!! AIM!!!!

DaveyJones's picture

yes, no other countries produce food.

Notsobadwlad's picture

So, what would happen if the elitist f*cktards threw a war and nobody decided to fight. (maybe that is why they need drones and robotic armies designed for the sole purpose of murdering people)

I have hope that even though this might not be the day, that someday it will happen. It is said that it is very hard to start a war that is covincing enough to get the people behind it. Maybe the people are growing up and soon will no longer need the parasitic masters of the dialectic to run their lives ... and then we can simply tell them to "go away".

The Chinese elitists would obviously prepare for war by reducing their dependence on the west.

Mentaliusanything's picture

last time I checked, my underwear was made in China. suck on that!

for every thing else it's Mastercard..... till you lose that advantage.

Spy V Spy was one of my favorite things as a child.

USA . even your "Worlds largest"Momo hull cranes in New York building a new bridge up state does not make the list. China...... Pawned big time.

Sorry, as an American by Birth, I am ashamed how far you have fallen.

Once you were the light of the world.... Now you have become a owned entity with so much coruption you shall surely fall. It breaks my heart to say it..... you have lost another War. Junk away but it's becoming a joke everywhere but your ears are closed.. exceptional only to the year 1963, then you Fucked it up (Warren Commission, my ass still points to the ground)

Edward Snowdon... That was a whole big can of Woop ass. Needed but not wanted, except you.. Thanks for what its worth. You cannot undo what has been undone. Sorry but thanks

Omen IV's picture

Mental... you said: "Sorry, as an American by Birth, I am ashamed how far you have fallen. Once you were the light of the world.... Now you have become a owned entity with so much coruption you shall surely fall."

I agree and feel exactly the same - especially about 63' - the question for me is why so late in life did it become crystal clear that we are all in a scumbag system? i should not have been supportive as an american for so long

it should have been obvious that Vietnam  - when in the midst of it in 69' -  was not a one off event but was emblematic of an entire sick system - end to end - that was never ever, ever  the communists or Al Queda being the problem - but the USA at the core of the world wide corruption / sickness which it promotes 

 

MrPalladium's picture

Foreign governments generally knew what NSA was doing. But by making it all public, Snowden created massive political pressure on foreign governments to do something to protect their communications. And the extent of involvement by U.S. big tech opened the door to massive protectionists moves in tech purchasing.

All this was forseeable but for some odd reason not foreseen.

silentboom's picture

We were exceptional right up until the founding of the Federal Reserve and the income tax.  After that the money began it's descent and the government began balooning.  It was slow until the 70's when the mistakes came to a head and the gold standard was completely abandoned.  Now we have no savings, massive debt, uncontrolled government growth, and intervention into all things foreign and domestic.  Americans didn't know enough to complain about the Fed so it ran unchecked, they are too busy chasing socialism in the forms of boogie men like global warming or wage equality to see what's really causing the middle class to be destroyed.  By the time Americans realize what's happening, if they ever do, it will probably be too late.  100 years of setting growth records, then 100 years of squandering the wealth.

Kina's picture

The US is a bunch of dumb cnuts.... still trying the bully boy ways as always..but this time it is China and Russia. And certainly with China bullying will get Obama a smack in the face.

 

Is OK when the US bullies its Europeane peasnt leaders with all those NSA obtained personal secrets..they will just bend over and take it up the arse. But China...well you cause them to lose face they will shoot back.....their biggest weapon...the current size and the potential size of its market now and in the future....and the competitive loss of US companies as China developes its own or allows in non US competitors.

 

Corporate America will spanking Obama's little bottom if he keeps this shit up....he hasn't learned properly that don't speak until the Oligarchs give the script...no ad libing bozo.

g'kar's picture

"Corporate America will spanking Obama's little bottom if he keeps this shit up....he hasn't learned properly that don't speak until the Oligarchs give the script...no ad libing bozo."

 

Nothing a little bailout can't fix.

aleph0's picture

 

And what about all the Software ?

Much bigger headache for the  Chinese ... probably easier to just clone the IBM machines .

 Or there are no mainframes ... but just Unix machines.

Colonel Klink's picture

Fuck IBM, the Chinese finally see it for what it is....Big Brue-t! (sic)

Colonel Klink's picture

For you two down voters, just look how they fucked their employees with the whole pension shafting.  Look how they've laid off massive amounts of US workers to hire a vast amount of Indian workers.  Having worked for them for several years and witnessed it all firsthand, you may want to readjust your thinking.  If not, remain ignorant!

Calculus99's picture

The USA is the blowback capital of the world.

 

ThisIsBob's picture

Well I wouldn't  buy anything from those cocksuckers either.

rgetty's picture

Fuck the Chinese. grow some balls US GOV. stop allowing them to buy up property take away the smith field sale, could a US company buy a pork producer in China? Fuck No! kick them all the fuck out . They want to dump US bonds. go ahead but they wont, if they take a lose who cares, they are big boys they should know the risks with investing, stop whining.

espirit's picture

The old playbook suggests you let them in to build the infrastructure, then nationalize the asset and kick the useful idiots out.

But here in the USSA, I'm unclear who the useful idiots are.

youngman's picture

The question is will they sell the used stuff on Alibaba...or Ebay....I need to know to buy the IPO

NYPoke's picture

Well, if you want to crash the markets, requiring the entire (Chinese) financial industry to overhaul their entire I.T. structure...ASAP...should do it.

 

Not that I blame them.  However, when technology gets caught in politics, it rarely ends well, especially for an entire industry.  NSA/CIA are at fault, but that really won't matter when it all unwinds.

Ignorance is bliss's picture

This could be a good thing. Global trade was just a way to squeeze the worker. Let's start bringing business back to America.

espirit's picture

Doood, we sold them all our steel and replaced it with plastic trinkets.

 

Ignorance is bliss's picture

I asked the checkout girl at the local grocery store if she knew what Memorial day stood for. She had no idea. Its not just the government, this country has real issues. At some point we need to withdraw and start addressing real issues that effect Americans and not just international business.

espirit's picture

It's bad, real bad.

If that girl at the checkout was to lose use of her iThingy, her life would not be worth living.

Atticus Finch's picture

I asked numerous TSA agents if they knew what the Fourth Amendment of the Constitution was and I never found a single one who knew.

I asked one TSA agent if she knew what the Bill of Rights was. Her reply, "What's that?"

silentboom's picture

In order to do that we would have to remove the regualtory handcuffs from our businesses which would allow us to produce things cheaply but regualtors are going the other direction.  In fact they're even arming the EPA.