Cisco’s disastrous quarter shows how NSA spying could freeze US companies out of a trillion-dollar opportunity

Changes are afoot for Cisco: The first is that the company is aggressively moving into the Internet of Things -- the effort to connect just about every object on earth to the internet -- by rolling out new technologies. The second is that Cisco has seen a huge drop-off in demand for its hardware in emerging markets, which the company blames on fears about the National Security Agency using American hardware to spy on the rest of the world.

Cisco chief executive John Chambers said that he believes other American technology companies will be similarly affected. Cisco saw orders in Brazil drop 25% and Russia drop 30%. Both Brazil and Russia have expressed official outrage over NSA spying and have announced plans to curb the NSA’s reach. Analysts had expected Cisco’s business in emerging markets to increase 6%, but instead it dropped 12%, sending shares of Cisco plunging 10% in after-hours trading. This completely unexpected turn, which Chambers said was the fastest swing he had ever seen in emerging markets, comes just as Cisco is trying to establish itself as a bedrock technology provider for of the internet of things, which industry analysis firm IDC says will be an $8.9 trillion market by 2020.