Chambers Shreds Huawei, Cisco Cuts Ties With ZTE3:26 PM EST Tue. Oct. 09, 2012
Following several recent statements, Cisco CEO John Chambers is making it abundantly clear that two Chinese telecom companies labeled "national security risks" by U.S. lawmakers are absolutely, positively no friends of his.
In an exclusive interview with CRN at Cisco's San Jose, Calif., headquarters earlier this month, Chambers took aim specifically at $35 billion giant Huawei, which a year ago, Chambers described as perhaps Cisco's most-formidable long-term threat.
"They've got some people really questioning do they play by the rules, of which I'm clearly one of them who says, no they don't," Chambers told CRN. "And we're getting them very much in our crosshairs on innovation."
Huawei's growth is slowing, said Chambers, who claimed that in areas like service provider business, Cisco has "dramatically outgrown them on their home court."
"Their operating margins are down to 9 percent," Chambers said, referencing the 9.1 percent operating margin Huawei reported for its fiscal 2011. "That means real problems."
Chambers' CRN interview took place a week before a report published Monday by the U.S. House of Representatives' Permanent Select Committee on Intelligence denounced Huawei and ZTE, another Shenzhen, China-based company, as national security threats.
In an interview that ran on CBS' 60 Minutes Sunday, anticipating the House committee report's release, Rep. Mike Rogers, a Michigan Republican and the committee's chairman, urged U.S. business owners to "find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America." The report itself recommends that the U.S. block any M&A activity involving the companies and American investments, and warns the U.S. government not to buy equipment from either firm.
In a statement posted to Huawei's corporate blog Monday, Huawei said the House committee's report "employs many rumors and speculations to prove non-existent accusations."
Huawei's U.S. distributor, solution provider and BPO partners, including Synnex, Essintial Enterprise Solutions, Condre Storage and Communications Test Design, have all declined to comment or have not responded to CRN requests for comment.
Chambers and Cisco did not comment specifically on the House Intelligence committee report, though Chambers and other executives have been relentless in attempting to paint the company as unethical and untrustworthy.
The two companies have a long and contentious history. Cisco sued Huawei in 2002 for alleged patent infringement, agreeing to settle the lawsuit out of court two years later after Huawei, according to Cisco, agreed to change its command line interfaces, user manuals and portions of its source code for a number of products Cisco says it had ripped off.
The full details of that settlement have been kept confidential, though in a blog post earlier this month, Cisco General Counsel Mark Chandler said Cisco would waive confidentiality requirements to dispute recent claims made by a Huawei lawyer about the nature of the agreement.
NEXT: Cisco Ends Reseller Relationship With ZTE
Meanwhile, Cisco's put House Intelligence committee target ZTE in its crosshairs, too.
In a separate story first reported by Reuters, Cisco cut ties with ZTE following an internal investigation said to have confirmed that ZTE is reselling branded Cisco equipment to Iran-based companies -- a violation of economic sanctions.
According to Reuters, Cisco probed its reseller relationship with ZTE following reports from the news service that ZTE had sold equipment from Cisco and other U.S. companies to Iranian telecom customers.
Chambers wouldn't discuss the ZTE probe, Reuters said, but he did say Cisco would not tolerate any direct or indirect sales to countries like Iran that are under economic sanctions. "And when that occurs, we step up and deal with it very firmly," Cisco's Chambers said.
PUBLISHED OCT. 9, 2012