* CEO Rometty to meet Vice Premier Wang Yang in 3-day trip
* Visit comes as IBM seeks to reverse China sales slump
* Visit is second by top IBM executive in four months
By Matthew Miller
BEIJING, Feb 12 A slide in IBM Corp's
sales in China amid a broad backlash against claims of U.S.
government spying has triggered a rare visit to Beijing by Chief
Executive Officer Ginni Rometty.
The head of the world's biggest technology services company
arrives in China's capital on Wednesday for three days of
meetings with government leaders, according to people familiar
with her visit. The visit comes as U.S. firms like IBM and Cisco
Systems Inc seek to restore trust with Chinese
regulators and reverse slumping sales.
Beijing has encouraged state-owned companies to buy
China-branded products since last year's revelations by former
National Security Agency contractor Edward Snowden of spying.
That has undercut business at some U.S.-based multinationals
operating in the world's second-biggest economy.
In Beijing, Rometty will have meetings with Chinese
officials including Vice Premier Wang Yang, responsible for
helping to formulate China's economic policy. The IBM chief also
is expected to meet officials from the Ministry of Industry and
Information Technology, and top state-backed customers.
The precise agenda for the meetings couldn't be ascertained
"IBM doesn't talk about or confirm our executives' travel
plans," said New York-based company spokesman Edward Barbini.
Though IBM books only about 5 percent of its sales in China,
it has been operating there for 30 years, tapping into the
country's rise as an economic power. China sales fell more than
20 percent over the second half of last year, dragging down the
company's emerging markets business overall.
It's an unwelcome distraction for the Armonk, N.Y.-based
firm as it continues to embrace higher-margin software and
technology services while moving away from hardware. Last month,
IBM agreed to sell its low-end server business to Lenovo Group
Ltd., the Chinese firm that acquired IBM's ThinkPad
business nearly a decade earlier.
The $2.3 billion deal was struck at about one-half the
reported asking price a year earlier, after the low-margin
server business posted seven quarters of losses as clients moved
to cloud computing.
Rometty is the second top IBM executive to travel to Beijing
in the last four months to meet Chinese officials.
In November, IBM dispatched its head of governmental
programs, Christopher Padilla, the former Under Secretary for
International Trade at the U.S. Commerce Department, following
announcement of the company's third-quarter earnings.
Padilla met with Wang Chao, China's Vice Minister for
Commerce, along with officials from the Ministry of Industry and
Information Technology, according to people familiar with his
Rometty, in her meetings, is expected to emphasize the tech
giant's commitment to local partnerships, future cooperation,
and information security.
In the aftermath of Snowden's revelations, U.S. technology
companies, including IBM, "face an uphill battle proving their
equipment is not compromised", A.M. Sacconaghi of Bernstein
Research wrote last month.
The U.S. cloud computing industry alone may lose as much as
$35 billion in worldwide sales over the next three years,
according to estimates by the Information Technology &
Innovation Foundation, a Washington, D.C.-based non-profit
In December, Louisiana Sheriffs' Pension & Relief Fund sued
IBM at U.S. District Court in Manhattan, accusing the firm of
concealing how the U.S. spying scandal would reduce its China
business. IBM had lobbied Congress to pass legislation allowing
it to share personal data of customers in China and elsewhere
with the NSA, the lawsuit claimed.
"These allegations are ludicrous and irresponsible and IBM
will vigorously defend itself in court," IBM spokesman Doug
Shelton said in an e-mail.
In China, IBM is uncharacteristically reliant on hardware
sales, primarily to state-owned enterprises. While sales of
mainframe computers, servers, and storage account for about 15
percent of IBM's worldwide revenue, in China hardware comprises
40 percent of local revenue.
"China is going through a very significant economic set of
reform," IBM's chief financial official Martin Schroeter told
analysts on the company's earnings call last month.
"While there is more clarity on the overall plan, we
continue to believe that it will take some time for our business
in China to improve," he said.