China poses significant challenges for the enterprise networking vendor Cisco Systems. The result is an investment of over $10 billion in the country during the next few years.
Bloomberg reports that this will be a costly tactic to get back in the government’s good graces and stay competitive with Huawei Technologies and ZTE, which are eating into the enterprise networking share of Cisco.
Cisco’s $10 billion investment deal, sealed with China’s state economy planner, comes as the government promotes local firms at the expense of U.S. companies such as Qualcomm and Microsoft.
Earlier, China said it was concerned with the security of U.S. technology since Edward Snowden revealed details of spying by the National Security Agency. Following this, Cisco revenue from China plunged 20 percent in the quarter ending April from a year earlier. Earlier, Cisco Chief Executive Officer John Chambers admitted that China has become a challenging IT market for Cisco due to this development.
Cisco Chief Executive Officer John Chambers said he is optimistic Cisco will benefit from improved relations between the U.S. and China, yet the company’s $10 billion may not lead to significantly more business there.
Cisco’s investment agreement was with the National Development and Reform Commission, the same organization that extracted a $975 million fine from Qualcomm after starting an antitrust investigation.
The $10 billion investment will create jobs, fund research and development, spur innovation and equity investment, Cisco said Wednesday in a statement. Cisco also signed agreements to help 100 colleges advance training.
Cisco to invest $60 mn in India
The networking company also is increasing its investment in India. Cisco will spend $40 million to increase the size of its 4 million-square-foot factory in India. Cisco will spend $20 million to train an additional 120,000 Indian students at the Cisco Networking Academy by the end of 2020. The company has already taught about 100,000 Indian students how to design, build and maintain computer networks.