This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Edward Snowden, Economic Reforms Complicate Silicon Valley's China Challenge

Stocks in this article: CSCO IBM EMC ORCL QCOM

Nonetheless, reforms could spell good news for foreign companies with the correct skills and technologies, Brahm said. "There's going to be a big push in environmental technology as China moves to less fossil fuel usage," he added. "There's going to be huge investment in grid conversion, in energy efficiency systems and water conservation."

IBM, in particular, could benefit from its Smarter Planet initiative, which sells software and services to drive efficiency in areas such as industry, energy, transportation and government.

Still, U.S. companies have had to contend with some thorny political issues surrounding China's home-grown tech players. Last year, the U.S. House Intelligence Committee released a damning report on Chinese network-gear companies Huawei and ZTE. The 52-page document called for blocking acquisitions, takeovers or mergers involving Huawei and ZTE, citing the "threat to U.S. national security interests." The committee also said U.S. government systems and contractors should exclude Huawei and ZTE equipment.

The U.S. Government's stance may be weighing on Cisco, according to Mark McKechnie, telco equipment research analyst at Evercore Capital Partners. "I think that Cisco's sales to China were probably already a bit compromised as a result of the congressional backlash against Huawei," he told TheStreet. "That could explain why Cisco may be feeling it a bit more than some of the other U.S. tech companies."

Keen to gain market share, local firms are also increasing pressure on Oracle (ORCL), EMC (EMC) Cisco and IBM and  in China. Set against this backdrop, partnerships with major Chinese tech players, such as EMC's joint venture deal with Lenovo, could prove significant.

"China has certainly built good skills, capability and capacity to build a lot of these technologies on their own," warned Charles King, president and principal analyst of Pund-IT. "It doesn't take a big leap of the imagination to see a scenario where China says, 'thanks, but not thanks - we will buy a lot of these technologies from home-grown companies'."

Underlining this trend, China's National Development and Reform Commission recently started an anti-monopoly investigation of U.S. chipmaker Qualcomm (QCOM).

"They are clearly saying 'we want to develop our own industries'," said Evercore's McKechnie. "I would say that the Chinese government wants to make sure that local suppliers are benefitting from this [economic] growth as well."

--Written by James Rogers in New York.

>Contact by Email.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs