Inspur Group trying for IBM customers

Products of the Inspur Group Ltd are on display at an exhibition in Beijing.The Chinese server maker on Wednesday unveiled its "IBM to Inspur" initiative aimed at taking the US company's market share in China. Wu Changqing / For China Daily

Chinese server maker Inspur Group Ltd began a campaign to lure customers from International Business Machines Corp as the government studies whether domestic banks' reliance on IBM technology threatens national security.

Jinan-based Inspur on Wednesday unveiled its "IBM to Inspur" initiative aimed at taking the US company's market share in China, said a member of Inspur's marketing department who asked not to be named, citing company policy. Inspur hired more than 80 employees from IBM's hardware arm, he said.

The move may help Inspur capitalize on a dispute with the US after prosecutors there charged five Chinese military officers with allegedly hacking into American companies' systems. Toppling IBM in China would be a major challenge for Inspur, whose reported 36.7 billion yuan ($5.94 billion) of revenue in 2011 represented 5.5 percent of IBM's sales for that year.

"There aren't that many alternatives for high-end banking servers, so it's quite hard to find replacements," said Arthur Hsieh, an analyst at UBS AG in Taiwan.

The People's Bank of China, the Ministry of Finance and other government agencies are reviewing domestic banks' use of IBM servers and expanding a trial program to replace them with homegrown ones, four people familiar with the matter said. China Postal Savings Bank Co is using Inspur servers as part of the trial, which began in March 2013, the people said on Wednesday.

The China-US dispute may jeopardize revenue for American companies including Microsoft Corp and Apple Inc, both mentioned by the Xinhua News Agency as cooperating with the US National Security Agency.

Cisco Systems Inc has seen China sales drop off since revelations of an NSA spying program by Edward Snowden, according to Mark Natkin, managing director of Marbridge Consulting in Beijing. Snowden was granted asylum in Russia.

The Financial Times reported on Sunday that China ordered State-owned companies to cut ties with US consulting firms.

"The top-down push is very strong," said Duncan Clark, chairman of BDA China Ltd, a Beijing-based consultant to technology companies.

"While it used to be that nobody ever got fired for buying IBM, now that's switching to: everybody gets fired for buying IBM."

Inspur's Hong Kong-traded unit, Inspur International Ltd, lists Samuel Shen, the chief operating officer of Microsoft's Asia-Pacific Research and Development Group, as a nonexecutive director. Microsoft, which invested $25 million in the company in 2005, redeemed the remainder of its preferred shares in December and currently isn't listed as a shareholder, according to data compiled by Bloomberg.

In its 2013 annual report, Inspur International said it maintained "close cooperation" with strategic partners including Microsoft.

Joanna Li, a Beijing-based spokeswoman for Microsoft, didn't immediately respond to an emailed request for comment and couldn't be reached by mobile phone.

IBM's China spokesman, Anthony Guerrieri, didn't immediately respond to a request for comment on Inspur. In a statement on Wednesday, Armonk, New York-based IBM said it has been a trusted partner in China for more than 30 years and wasn't aware of any government policy recommending against the use of its servers.

The member of Inspur's marketing department said the company had hired employees from IBM's Systems and Technology Group and its business process outsourcing department.

Inspur's predecessor, Shandong Electronic Equipment Factory, began producing computer peripherals and low-frequency tubes in the 1960s, according to Inspur Group's website. China's first space satellite, launched in 1970, used Inspur transistors.