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NSA Revelations Kill IBM Hardware Sales in China

For several months there have been warnings that the NSA revelations will seriously upset American technology companies’ bottom lines. Though not directly implicated in any of the leaks thus far it appears that IBM’s Chinese growth predictions have just been fed through a wood chipper. From Zerohedge:

In mid-August, an anonymous source told the Shanghai Securities News, a branch of the state-owned Xinhua News Agency, which reports directly to the Propaganda and Public Information Departments of the Communist Party, that IBM, along with Oracle and EMC, have become targets of the Ministry of Public Security and the cabinet-level Development Research Centre due to the Snowden revelations.

“At present, thanks to their technological superiority, many of our core information technology systems are basically dominated by foreign hardware and software firms, but the Prism scandal implies security problems,” the source said, according to Reuters. So the government would launch an investigation into these security problems, the source said.

Absolute stonewalling ensued. IBM told Reuters that it was unable to comment. Oracle and EMC weren’t available for comment. The Ministry of Public Security refused to comment. The Development Research Centre knew nothing of any such investigation. The Ministry of Industry and Information Technology “could not confirm anything because of the matter’s sensitivity.”

This is the first quantitative indication of the price Corporate America has to pay for gorging at the big trough of the US Intelligence Community, and particularly the NSA with its endlessly ballooning budget. For once, there is a price to be paid, if only temporarily, for helping build a perfect, seamless, borderless surveillance society. The companies will deny it. At the same time, they’ll be looking for solutions. China, Russia, and Brazil are too important to just get kicked out of – and other countries might follow suit.

Now, IBM et al. aren’t necessarily purely victim to the NSA’s massive surveillance practices: there likely are legitimate domestic market changes that are also affecting the ability of Western companies to sell product in China and other Asian-Pacific countries. But still, that NSA can be used to justify retreats from Western products indicates how even companies not clearly and directly implicated in the scandals stand to lose. One has to wonder whether the economic losses that will be incurred following the NSA revelations are equal to, or exceed, any economic gains linked to the spying.