Tags: Brazil | NSA | tech | network

Another Reason US Tech Stocks Are Toast

By Wednesday, 21 May 2014 08:27 AM Current | Bio | Archive

Most Americans claim to believe in free market capitalism. "Caveat emptor," we say; let the buyer beware. When making a purchase, we evaluate the alternatives and choose one that best fits our objectives.

Americans forget, however, that foreign consumers have choices, too. They buy American-made products only when those products deliver what they want at a competitive price.

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Suppose you are the chief technology officer of a fast-growing Brazilian company. You need to buy networking equipment to execute your business plan. Security is one of your priorities. The CEO knows, thanks to Edward Snowden, that U.S. intelligence agencies monitored the communications of top executives at Brazilian energy giant Petrobras (PBR).

The CEO and board instruct you to make sure your company's private communications stay private. So when sales people from U.S. companies like Cisco (CSCO) come knocking, do you listen to their pitches?

The answer is almost certainly "no." According to documents Snowden gave journalist (and Brazilian resident) Glenn Greenwald, the National Security Agency (NSA) routinely intercepts U.S. networking gear while it is being shipped overseas in order to plant interception tools.

Think about what this means. Cisco and other tech leaders deny letting NSA weaken their products. Their carefully worded statements are full of loopholes, but let's presume for a moment that they are believable.

You, the Brazilian CTO, still have to avoid buying U.S. gear because you can't know whether the NSA tampered with your purchases. You know they've done it in the past despite official denials, so there is no reason to believe them now.

Even if President Obama personally promises the United States does not conduct economic espionage and that your U.S. technology purchases are safe, you still shouldn't buy American. There is an excellent chance Obama is either 1) lying or 2) unaware of what his own intelligence agencies are doing.

What do you do, Mr. Brazilian CTO? You need a secure, speedy corporate network. You can't trust industry leaders in the United States or its English-speaking "Five Eyes" allies: Canada, the United Kingdom, Australia and New Zealand.

You also know, because the U.S. government says so, that networking gear from Chinese companies like Huawei is similarly vulnerable to implanted surveillance abilities. The CEO doesn't want the China listening to his phone calls, either.

Your best choice is to buy locally made gear. It may cost more or lack some desired features, but it will make the CEO happy. He'll be more confident your technology is working for your company instead of against it.

A process very much like this is happening in businesses around the world. U.S. technology sales to emerging market nations have collapsed in the last year. Global growth plans at those companies are likewise collapsing. It is going to get worse, not better.

The worldwide technology industry is fragmenting into local and regional providers. The mega-cap U.S. hardware makers are in an impossible situation. They need international sales growth in order to justify their stock valuations, but their own government decided to make such growth impossible.

Good luck, Cisco. You're going to need it.

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PatrickWatson
Most Americans claim to believe in free market capitalism. "Caveat emptor," we say; let the buyer beware. When making a purchase, we evaluate the alternatives and choose one that best fits our objectives.
Brazil, NSA, tech, network
529
2014-27-21
Wednesday, 21 May 2014 08:27 AM
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