Analyst: NSA Scandal “Will Kill US Tech Industry”; Major US Players Report Alarming Q3 Results

Analyst: “NSA Scandal Will Kill US Tech Industry”

In September we reported about some of the initial economic fallout from the NSA surveillance scandal and that impact is only growing more severe.  At that time, Forrester had estimated the scandal could cost US cloud service providers $180 billion or a 25% hit to overall IT service provider.

This was before revelations that the NSA built in backdoors in certain encryption standards or was accessing Google and other companies’ unencrypted cloud data.   These revelations have made the situation even tougher for U.S. companies with China Daily  labeling U.S. companies as a “security threat.”

The impact of the NSA scandal was evident in Cisco’s latest earning report.  Cisco, which had been projected to report 6 percent growth in emerging markets, instead reported a 12 percent loss.  Q3 sales fell as follows:

  • China -18%
  • Mexico -18%
  • India -18%
  • Brazil -25%
  • Russia – 30%

Cisco CEO explained

You look around the world, the emerging markets, I have never seen that fast a move in emerging markets and that is something that when I talk with our industry peers, while there are exceptions, most of my CEO counterparts can almost finish my sentence in terms of what’s occurring.

Microsoft and IBM have also reported declines in China.

Technology industry analyst Rob Enderle claims that the “National Security Agency will kill the U.S. technology industry singlehandedly” as these companies “may be just dealing with the difficulty in meeting our numbers through the end of the decade.”

The overseas fallout includes

  • German calls for home-grown Internet and e-mail companies;
  • Brazil’s insistence that Google and other internet giants store local customer data within Brazil; and
  • India’s consideration of a ban on Google and Yahoo email services.

Google warns that Brazil’s data localization efforts if copied by others will lead to

the effective Balkanization of the Internet and the creation of a ‘splinternet’ broken up into smaller national and regional pieces with barriers around each of the splintered Internets to replace the global Internet we know today.

There is also one very big Cyber Elephant in the room – the NSA scandal has completely shelved all discussions/debate about improving cyber security standards to that point that the financial services industry recently has stepped forward and asked that Congress renew the debate.  Because of the NSA scandal, 2013 will be a lost year in terms of addressing the ever increasing cyber security threats.

 


More Info:  Cisco CEO: ‘Never Seen’ Such a Falloff in Orders, Wall Street Journal; NSA Snooping Takes Down U.S. Computer Networking Business, Infowars.com; THE COST OF PRISM WILL BE LARGER THAN ITIF PROJECTS, Forrester Research, Google takes flight to NSA, Boston Herald

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