Cisco said to plan China partnership to boost market access

The networking equipment company is planning to announce a partnership with server maker Inspur Group during Chinese President Xi Jinping's visit to Seattle on Wednesday, The Wall Street Journal reported on Tuesday.

Cisco said Tuesday it declined to comment on rumors related to any specific announcements or companies. Company spokesman Nigel Glennie said the company is optimistic about the opportunities for its China team, and is open to local partnerships playing a role in its future strategy. The company has done business in China for over 20 years and learned the importance of having the right relationships, he added.

U.S. technology companies are struggling in the Chinese market against local rivals backed by the government as well as Chinese suspicions that they have been used by the U.S. to spy against the country, following revelations in this connection by former National Security Agency contractor Edward Snowden. One report disclosed that the agency was intercepting and bugging networking and other equipment before it was sent to customers targeted for surveillance.

Referring to the reports, including a photograph of what appeared to be a Cisco package being tampered with, Cisco's executive chairman and former CEO John Chambers wrote in a letter last year to U.S. President Barack Obama that if the allegations are true, the actions will weaken confidence in the ability of technology companies to deliver products worldwide.

The Chinese government has, meanwhile, instructed its departments and state-run companies to buy more locally made equipment, while tightening rules for foreign makers, in part to boost the business for domestic players.

Cisco has faced geopolitical challenges in China during the last few years, Glennie said. "However we have always taken a long term view and continue to see great opportunity for our China team." China currently accounts for  about 3 percent of Cisco's global business, Glennie added.

At the same time, China has invited U.S. technology companies to invest in research and development in the country and a deal between Cisco and Inspur will likely include both reselling of gear and joint development of products and technologies for the local market.

Other U.S. tech companies have also made overtures to China recently. Dell said this month that it plans to spend US$125 billion over the next five years in the company's second largest market outside the U.S., including to invest in tech startups, expand its own research and development team, and collaborate with the state-controlled Chinese Academy of Sciences to set up an “Artificial Intelligence and Advanced Computing Joint-Lab.”

Intel said last year it was investing in local chip companies for design of mobile phone chips, while Hewlett-Packard said in May it would sell a majority stake in its server, technology services and storage business in China to a Tsinghua Holdings subsidiary to boost sales of HP's enterprise products in the country.

Cisco had earlier tried to have a joint venture with the state-owned China Electronics Technology Group, but that deal fell through, according to WSJ.

During his visit to the U.S., Xi is expected to meet a number of tech leaders including Apple CEO Tim Cook and Microsoft CEO Satya Nadella.