In November, China appeared to stonewall IBM, Cisco Systems Inc. (NASDAQ: CSCO) and Microsoft Corp. (NASDAQ: MSFT) in response to media reports that they were aiding the NSA through a program known as Prism. The use of Prism and other disclosures were revealed to the press by former NSA contractor Edward Snowden.
The complaint claims that IBM’s lobbying of Congress to pass a law letting it share personal data of customers in China and elsewhere with the NSA threatened IBM hardware sales in China. IBM reported disappointing third-quarter results, including a 22% loss in revenue from China and a 40% decline in overall hardware sales. Total revenue came in well below analyst forecasts. IBM shares fell more than 6% on the news, wiping out more than $12 billion of the company’s market value.
Chief Executive Virginia Rometty and Chief Financial Officer Mark Loughridge are named in the lawsuit as defendants. The complaint says they should be held liable for the company’s failure to reveal the risks of its lobbying and its NSA ties sooner.
Reported actions of the NSA that have caused controversy since he leaks by Snowden include spying on the German and Mexican presidents, installing surveillance equipment at foreign embassies, creating malware that infected many thousands of computers, breaking into the networks of Microsoft and Google Inc. (NASDAQ: GOOG) and even infiltrating online multiplayer games.
IBM shares were up fractionally in premarket trading Monday to $173.88, in a 52-week range of $172.57 to $215.90.
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