Talk about companies playing by government rules & guidelines and you will hardly be able to find a better example than Cisco. It was just yesterday that America’s House Intelligence Committee issued a report accusing Huawei and ZTE of “posing a national security threat and discouraging American businesses from buying their equipment.”
And less than 24 hours later, Cisco has ended a longstanding sales partnership with ZTE Corp following allegations that the latter sold Cisco networking gear to a Iranian telecom firm. Time and again, Cisco CEO John Chambers has hinted that he isn’t fond of Huawei and ZTE so in that context, the decision to call it a day with the latter, is hardly surprising.
While it’s all being done in the name of ‘avoiding national security risks’, Chambers on several occasions has publicly admitted that the two Chinese companies are Cisco’s most-formidable long-term threats.
While ZTE has denied selling any gear to Iranian government, Cisco, which has been in a distribution agreement with ZTE for the past seven years, confirmed on Monday that it now had “no current relationship with ZTE”.
As my fellow blogger Matt Klassen mentioned yesterday, this is indeed a tricky situation for all parties – the two governments as well as companies involved on either side. So how should we view this? Is this all just fear-mongering as part of a communist witch hunt, or simply corporate security due process? But then the U.S. for long projected itself as the dream destination which offers equal opportunity to become successful.
“Unless there is clear evidence that either of these companies has or is poised to engage in espionage activities on behalf of China, it truly seems like many of the unjustified fears of the Cold War still remain. The situation makes even less sense when you take into account the symbiotic trade relationship America and China already have, making me wonder why very facet of Chinese involvement in the American market is not subject to the same scrutiny.”
David Dai Shu, a ZTE spokesman, said:
“ZTE is highly concerned with the matter and is communicating with Cisco. At the same time, ZTE is actively co-operating with the U.S. government about the probe to Iran. We believe it will be properly addressed.”
I have no doubt that Cisco saw this as an opportune moment to set the record straight with ZTE. The networking giant first tied up with ZTE seven years ago to counter the price competition being faced by it against Huawei products. ZTE helped Cisco to manufacture its products in China so that its products can be price competitive. Though the seven-year period ended in 2010, ZTE continued as a licensed distributor and reseller of Cisco products.
However, as of date, it’s all over between Cisco and ZTE. Whatever the actual reasons may be, it’s sad to see two networking giants part ways on a not so amicable note.