The Two-Way
4:21 pm
Fri November 15, 2013

U.S. Tech Firms May Be Feeling Bite From NSA Spying Reports

Originally published on Fri November 15, 2013 4:25 pm

Recent disclosures about NSA surveillance have affected U.S. relations with allies and tainted America's image around the world. Now the fallout seems to be creeping into the U.S. tech sector.

Cisco Systems, which manufactures network equipment, posted disappointing first-quarter numbers this week and warned that revenues for the current quarter could drop as much as 10 percent from a year ago — partly as a consequence of the NSA revelations.

The company's chief financial officer, Frank Calderone, told analysts that reports the NSA is intercepting electronic data transfers have created "a level of uncertainty or concern" among customers, particularly in emerging markets.

Cisco shares plummeted, losing more than 11 percent of their value, on Wednesday's news.

Though the impact of the National Security Agency revelations isn't evenly shared across the tech sector, other companies are also feeling the bite.

Google's chief legal officer, David Drummond, cited Cisco's problems during remarks at a conference Thursday in Washington, D.C., saying his company has the same commercial concerns. Speaking before the World Affairs Councils, Drummond faulted the NSA's handling of the surveillance controversy.

"The justification has been couched as 'Don't worry. We're only snooping on foreigners,' " Drummond said. "For a company like ours, where most of our business and most of our users are non-American, that's not very helpful."

In testimony this week before a Senate Judiciary subcommittee, another top Google executive cited industry estimates that the U.S. cloud computing industry could lose tens of billions of dollars or even more in revenue as a consequence of the disclosures about NSA collection of electronic data from private companies.

Richard Salgado, Google's director of law enforcement and information security, noted that Brazil is considering legislation that would require data relating to Brazilian business operations and Brazilian citizens to be stored in Brazil.

"Companies like Google that do not comply with such a requirement could be barred from doing business in one of the world's most significant markets or be obligated to pay hundreds of millions of dollars in fines," Salgado stated in his written testimony.

NSA leaders say they share industry concerns over the commercial impact of the surveillance disclosures, but they have not promised any changes in their collection efforts as a result.

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