In­spur Group try­ing for IBM cus­tomers

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Chi­nese server maker In­spur Group Ltd be­gan a cam­paign to lure cus­tomers from In­ter­na­tional Busi­ness Ma­chines Corp as the govern­ment stud­ies whether do­mes­tic banks’ re­liance on IBM tech­nol­ogy threat­ens na­tional se­cu­rity.

Ji­nan-based In­spur onWed­nes­day un­veiled its “IBM to In­spur” ini­tia­tive aimed at tak­ing the US com­pany’s mar­ket share in China, said a mem­ber of In­spur’s mar­ket­ing depart­ment who asked not to be named, cit­ing com­pany pol­icy. In­spur hired more than 80 em­ploy­ees from IBM’s hard­ware arm, he said.

The move may help In­spur cap­i­tal­ize on a dis­pute with the US af­ter prose­cu­tors there charged five Chi­nese mil­i­tary of­fi­cers with al­legedly hack­ing into Amer­i­can com­pa­nies’ sys­tems.

Top­pling IBM in China would be a ma­jor chal­lenge for In­spur, whose re­ported 36.7 bil­lion yuan ($5.94 bil­lion) of rev­enue in 2011 rep­re­sented 5.5 per­cent of IBM’s sales for that year.

“There aren’t that many al­ter­na­tives for high-end bank­ing servers, so it’s quite hard to find re­place­ments,” said Arthur Hsieh, an an­a­lyst at UBS AG in Tai­wan.

The People’s Bank of China, the Min­istry of Fi­nance and other govern­ment agencies are re­view­ing do­mes­tic banks’ use of IBM servers and ex­pand­ing a trial pro­gram to re­place them with home­grown ones, four people fa­mil­iar with the mat­ter said. China Postal Sav­ings Bank Co is us­ing In­spur servers as part of the trial, which be­gan in March 2013, the people said onWed­nes­day.

The China-US dis­pute may jeop­ar­dize rev­enue for Amer­i­can com­pa­nies in­clud­ing Mi­crosoft Corp and Ap­ple Inc, both men­tioned by the Xin­hua News Agency as co­op­er­at­ing with theUSNa­tional Se­cu­rity Agency.

Cisco Sys­tems Inc has seen China sales drop off since rev­e­la­tions of an NSA spy­ing pro­gram by Ed­ward Snow­den, ac­cord­ing to Mark Natkin, man­ag­ing di­rec­tor of Mar­bridge Con­sult­ing in Bei­jing. Snow­den was granted asy­lum in Rus­sia.

The Fi­nan­cial Times re­ported on Sun­day that China or­dered State-owned com­pa­nies to cut ties with US con­sult­ing firms.

“The top-down push is very strong,” said Dun­can Clark, chair­man of BDA China Ltd, a Bei­jing-based con­sul­tant to tech­nol­ogy

While it used to be that no­body ever got fired for buy­ing IBM, now that’s switch­ing to: ev­ery­body gets fired for buy­ing IBM.”

DUN­CAN CLARK, BEI­JING-BASED CON­SUL­TANT

com­pa­nies.

“While it used to be that no­body ever got fired for buy­ing IBM, now that’s switch­ing to: ev­ery­body gets fired for buy­ing IBM.”

In­spur’s Hong Kong-traded unit, In­spur In­ter­na­tional Ltd, lists Sa­muel Shen, the chief op­er­at­ing of­fi­cer of Mi­crosoft’s Asi­aPa­cific Re­search and De­vel­op­ment Group, as a nonex­ec­u­tive di­rec­tor.

Mi­crosoft, which in­vested $25 mil­lion in the com­pany in 2005, redeemed the re­main­der of its pre­ferred shares in De­cem­ber and cur­rently isn’t listed as a share­holder, ac­cord­ing to data com­piled by Bloomberg.

In its 2013 an­nual re­port, In­spur In­ter­na­tional said it main­tained “close co­op­er­a­tion” with strate­gic part­ners in­clud­ing Mi­crosoft.

Joanna Li, a Bei­jing-based spokes­woman for Mi­crosoft, didn’t im­me­di­ately re­spond to an emailed re­quest for com­ment and couldn’t be reached by mo­bile phone.

IBM’s China spokesman, Anthony Guer­ri­eri, didn’t im­me­di­ately re­spond to a re­quest for com­ment on In­spur. In a state­ment on Wed­nes­day, Ar­monk, New York­based IBM said it has been a trusted part­ner in China for more than 30 years and wasn’t aware of any govern­ment pol­icy rec­om­mend­ing against the use of its servers.

The mem­ber of In­spur’s mar­ket­ing depart­ment said the com­pany had hired em­ploy­ees from IBM’s Sys­tems and Tech­nol­ogy Group and its busi­ness process out­sourc­ing depart­ment.

In­spur’s pre­de­ces­sor, Shan­dong Elec­tronic Equip­ment Fac­tory, be­gan pro­duc­ing com­puter pe­riph­er­als and lowfre­quency tubes in the 1960s, ac­cord­ing to In­spur Group’s web­site. China’s first space satel­lite, launched in 1970, used In­spur tran­sis­tors.

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