Networking gear maker Cisco Systems, Inc. (CSCO) is said to have ended its seven-year sales partnership with Chinese hardware manufacturer ZTE Corp. for alleged violating U.S. sanctions on Iran . ZTE was a reseller of Cisco products in Asia, excluding Japan, and the Middle East. A Cisco spokesman said, "Cisco has no current relationship with ZTE."
The news comes close on the heels of the release of a U.S. House of Representatives' Intelligence Committee report that called for the ban on Chinese telecom equipment makers Huawei Technologies Co. and ZTE amid alleged spying charges due to ties with the Chinese government and military.
"Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems," the committee report noted.
An internal probe conducted by Cisco revealed that ZTE sold Cisco products to Telecommunication Co of Iran or TCI, despite the U.S. sanctions on Iran. ZTE reportedly set up new companies primarily to sell Cisco products to Iran in order to bypass the sanctions on Iran. Cisco launched the probe in March following a media report.
The Cisco products sold by ZTE were reportedly part of a surveillance system being supplied by Shenzhen-based ZTE which has the ability to monitor landline, mobile, and Internet communications.
San Jose, California-based Cisco tied up with ZTE seven years ago to counter the price competition being faced by it against Huawei products. ZTE helped Cisco to manufacture its products in China so that its products can be price competitive. Though the seven-year period ended in 2010, ZTE continued as a licensed distributor and reseller of Cisco products.
CSCO closed Monday's regular trading session at $23.47, down $1.68 or 5.49% on a volume of 0.63 million shares,
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