IBM Leads the Dow Jones Lower as China Asks Banks to Replace IBM Servers

China is becoming a worse problem for IBM, the second-largest DJIA stock.

May 28, 2014 at 1:31PM

IBM (NYSE:IBM) is leading the Dow Jones Industrial Average (DJINDICES:^DJI) lower after a report from Bloomberg said that China is asking banks to replace IBM servers with locally made servers due to security concerns. As of 1:30 p.m. EDT the Dow was down 33 points to 16,642. The S&P 500 (SNPINDEX:^GSPC) was down 1 point to 1,910.

IBM is down 0.6% as more investors digest the possibility that IBM's business will be hurt by Chinese government action. In IBM's most recent annual report, Chinese operations are not singled out, but Asia less Japan makes up 14% of IBMs revenue, and China likely accounts for most of that portion. IBM was already hurting in China, with revenue in the country down 12.2% last year (14% adjusted for currency) as business activity slowed in the country. IBM attributed last year's drop to "the process surrounding the implementation of a broad governmental economic reform plan."

This drop was in part due to the multiples releases by Edward Snowden showing that U.S. technology companies worked jointly with the NSA. Many governments around the world broached the idea of moving away from U.S. technology companies or requiring them to store data locally.

Bloomberg reported last night that the Ministry of Finance is asking banks to replace IBM servers with locally made ones, citing security concerns. If this spreads to other industries, IBM would take a large hit in China. While perhaps partly related to the Snowden disclosures, this is more likely related to the U.S.' Department of Justice's case, announced last week, against five Chinese military officials for hacking U.S. companies in relation to trade talks in the steel industry. In that case, U.S. Steel, Westinghouse, Allegheny Technologies, Alcoa, and the United Steelworkers union were hacked in an effort to steal trade secrets.

It's no secret that U.S. companies have been under assault from Chinese cyber espionage units for years. Usually companies do not like to publicize their security breaches, but cover-ups do nothing to end the problem. With the U.S. now publicizing cases of cyber espionage, perhaps the problem will lessen, but in the meantime companies like IBM and other major hardware providers will suffer in China as the U.S. tries to embarrass the Chinese government into stopping illegal trade espionage.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click here to discover more about this industry-leading stock and join Buffett in his quest for a veritable landslide of profits!

Dan Dzombak has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers