Cisco kills ZTE sales partnership

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Cisco’s long running relationship with ZTE is over after an internal investigation found that the company broke US trade sanctions.

The seven year old sales partnership between Cisco and ZTE is over after an investigation decided that the Chinese telco equipment maker broke US sanctions.

A Cisco investigation found that ZTE had been selling its networking gear to Iran. The probe was started when Reuters ran a story about how Shenzhen-based ZTE had sold computer equipment from Cisco and other US companies, which are banned from exporting to Iran.

The deal was with Iran’s largest telecoms firm, TCI. ZTE shipped millions of dollars worth of additional US tech products, including Cisco switches used to route phone and data traffic, to a unit of the government-controlled consortium that controls the Iranian telecoms firm.

The story was confirmed by ZTE’s general counsel at its Texas-based subsidiary who claimed that the parent company plotted a cover-up, including possibly shredding documents. The FBI is still investigating that claim.

David Dai Shu, a ZTE spokesman, said ZTE is highly concerned at Cisco’s decision to cut sales ties and was still communicating with the company.

He said that ZTE was co-operating with the US government about the probe into allegations over Iran and remains confident it can be sorted out.

A ZTE spokesperson told the Guardian that  the company can no longer offer Cisco equipment in the UK, but hinted that it had other similar gear.

John Chambers, Cisco’s chief executive, said Cisco doesn’t “tolerate any direct or indirect” sales of its equipment to embargoed countries such as Iran.

Cisco and ZTE’s partnership was not always stable but was seen as necessary to combat Huawei. Huawei had been seen to be beating Cisco on some fronts by offering significantly cheaper products.

Cisco’s plan was to licence technology to ZTE and they would produce equipment locally, therefore having a range of equipment in the marketplace that would be cost-competitive with Huawei.

The plan to develop projects jointly, and offer them in markets such as Africa did not work because they could not get their teams to collaborate and clashed over the US market.

By 2010, ZTE continued as an authorised distributor and reseller of Cisco products, until now.


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