Gazeta: “Tupi Tech is a Nervous Wreck”

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Will all subequatorial Cisco boxes go dark, bringing an abrupt and catastrophic end to the tropical Information Age? There are those who say so, but none of them seem willing to stake their credibility on the prediction by signing their name to it.

The investigations to come might will require all these companies to report on their pricing, taxes collected, logistics and other details to confirm or rule out information obtained during Operation Persona.

The Gazeta Mercantil (Brazil) corrects earlier reporting by InvestNews on the Cisco affair down here in Brazil.

The first part of the story is based on two anonymous sources, one of them promoting the (gabbling, I tend to think) Enron analogy — see also Cisco in Deep Crisco: “Could Be Another Enron!”

But it does finally get to what I think is probably the really burning question here: Who might be next to suffer a thorough borking from the tax man over illegal tax and tariff evasion practices?

How bad might it get? And for whom?

The really intriguing issue that remains for me, I think, rereading the press release from the feds on the case, is the case of the Panamanian law firm that, the feds made a point of charging, engages in a lot of irregular practices, not just in Brazil, but in the region.

And what Panama-based international lawfirm would that be anyway? You think maybe the fledgling Mercosul is already comparing notes?

I do think you see signs of some coordinated action already. Telefónica being challenged by regulators in other South American countries over its philosophy of customer service — “We’re the phone company. We don’t care. We don’t have to.” — for example …
Some excerpts:

SÃO PAULO, 18 de outubro de 2007 – Diferentemente do que foi publicado hoje na matéria “Caso Cisco deixa mercado de tecnologia apreensivo”, a Network1 não distribui os produtos da Cisco no Brasil, mas de concorrentes da multinacional americana. Segue abaixo texto corrigido:

Unlike what was published today in the article “Cisco case leaves tech market uneasy,” Network1 does not distribute Cisco products in Brazil, but rather the products of Cisco’s competitors. The corrected text follows:

Além de macular a imagem, quem fez compras da empresa teme não receber os produtos. O momento é de tensão para o mercado de telecomunicações. Todas as operadoras telefônicas fixas e celulares, call centers e empresas de internet em geral compram roteadores e sistemas de rede internet da Cisco Systems, envolvida na Operação Persona da Polícia Federal, que ontem prendeu 40 pessoas suspeitas de envolvimento em fraude fiscal, incluindo o presidente Pedro Ripper e o ex-presidente Carlos Roberto Carnevali. O volume da sonegação pode atingir R$ 1,5 bilhão, segundo a Polícia Federal.

Besides staining its public image, those who ordered from Cisco are afraid they will not get the products they ordered. It is a tense moment in the telecommunications market. All the fixed-line and cellular telephone operators, call centers and Internet providers in general buy routers and Internet systems from Cisco, which is involved in Operation Persona, in which 40 persons were arrested on suspicion of fraud, including Cisco Brasil president Ripper and former president Carnevali. …

Embora a multinacional americana não preveja interrupção dos negócios, o mercado doméstico como um todo está muito apreensivo. Milhões de dólares têm sido investidos na extensão das redes de banda larga das teles, pois é através da banda larga que todos os serviços serão operados daqui para frente, incluindo voz, dados e TV por assinatura. Esses investimentos garantem o crescimento de seus negócios e dependem, na maior parte, de sistemas de redes como os fornecidos pela Cisco.

Cisco does not foresee any interruption of its business activities, but the domestic market as a whole is apprehensive. Millions have been invested in the extension of the telecom companies’ broadband networks, since it is over broadband connections that future services will be delivered, including VoIP, data and cable TV. These investments guarantee the growth of their businesses and depend, in large part, on equipments such as Cisco supplies.

A ordem de grandeza do problema detectado pelas autoridades fiscais leva os executivos consultados por este jornal a preverem período de paralisação da multinacional no País. “Até que se recomponha, os negócios serão suspensos”, acredita executivo do setor que se baseou nos escândalos financeiros da Enron e MCI, nos Estados Unidos.

The magnitute of the problem detected by tax authorities has led executives consulted by this newspaper to predict a period of paralysis for Cisco in Brazil. “Until it regains its composure, its business will probably be suspended,” believes one executive from the sector, basing his conclusions on the financial scandals involving Enron and MCI.

Who deserves anonmity as a source of punditry why? One of the striking points Bill Keller made in his revisions to the Times integrity guidelines, I thought, was just that under very few circumstances, if any, do opinions merit anonymous sourcing.

Cisco may, as I am reading, wind up owing some $880 million in taxes and penalties, depending on how the case comes out and gets settled. Maybe a good lawyer can knock that down some. Enron owed about a gazillion times more than its cash on hand when they started calling in the loans. The people it defrauded were, not the tax man, but its shareholders and creditors. The two cases are quite dissimilar.

And I get the feeling that it is not so much the money in this particular case that is the true point of the exercise, but putting an end to the general plundering for good and all.

So please. It is very easy to say absurd things anonymously. No one can point to you later and say, “Look, there’s the guy who predicted the DJI would hit 36,000 by 2004. Let’s not listen to anything else he has to say. He’s an idiot.”

Os concorrentes da Cisco no País, entre os quais Avaya, Juniper, Huawei, Extreme Networks, Nortel, Alcatel-Lucent e Microsoft, vão enfrentar um período de competição relaxada e poderão ocupar o espaço a ser deixado pela Cisco, ainda que provisoriamente. No entanto, essa reação não está sendo encarada como positiva. “A pancada foi tão grande e prejudica tanto o mercado de telecomunicações que não há benefício momentâneo que possa compensar o estrago”, afirma executivo de uma concorrente ‘beneficiada’.

Cisco’s competitors in Brazil, among them Avaya, Juniper, Huawei, Extreme Networks, Nortel, Alcatel-Lucent, and Microsoft, face a period of relaxed competition and may occupy the space ceded by Cisco, even if temporarily. However, this reaction is not being seen as positive. “The beatdown was so severe that it harms the entire telecoms market so badly that there is no momentary advantage that could compensate for the mess that has been made,” says an exec from a competitor who may “benefit.”

A partir desse escândalo, o executivo acredita que todas as fornecedoras e clientes passarão a integrar o alvo da Polícia Federal. As investigações que se seguirão deverão requisitar das empresas a relação de preços pagos, impostos recolhidos, logística das entregas, e outros detalhes para confirmar ou não informações obtidas durante a Operação Persona.

Based on this scandal, the executive believes that all suppliers and their clients will become targets of the Federal Police.

That occurred to me immediately as well, although “targets” may be a strong word.

Their “cooperation may be requested,” I would venture to predict.

(And if I am wrong,well, you at least know the name of the idiot to blame — and besides, I do not claim to be an expert on the subject. I just make these side bets with myself to test whether I am beginning to know anything useful or not.

In fact, I advise you strongly not to bet the farm on my punditry on topics I admit I know little about — yet.)
The investigations to come might will require all these companies to report on their pricing, taxes collected, logistics and other details to confirm or rule out information obtained during Operation Persona.

No comunicado enviado pela matriz da Cisco, ela destaca que “os negócios permanecem” por meio dos parceiros diretos, da classe “tier 1” (da categoria 1). No Brasil, existe uma dezena de empresas nesse nível, que importam produtos diretamente da Cisco americana. Uma delas é a Telsinc. “Toda nossa relação comercial é por meio do portal de compras B2B (entre empresas) da Cisco. Toda a logística fica por conta da Telsinc”, diz o diretor de marketing da empresa, Rogério Vedovato, que comenta que apesar do caso fez entregas grandes nos dois últimos dias e ainda tem para a próxima semana.

In a press release from corporate headquarters, Cisco underscored that “its business activities continue through its direct, Tier One partners.” In Brazil, there are ten firms in this class who import products directly from Cisco in the USA. One of them is Telesinc. “Our entire business relationship is through Cisco’s B2B portal. The logistics is up to Telesinc,” said marketing director Vedovato, who says that despite the case large orders have been filled in the last few days, and more are scheduled for next week.

Marketing director of Telesinc, I think they mean.

“Pode haver problema com os distribuidores pequenos e médios”, diz. A Cisco possui no Brasil, além dos 10 parceiros tier 1 e dos dois principais distribuidores, centenas de canais menores de vendas. “Eles podem ter problema momentâneo de entrega, até hoje, sem conseguir comprar dos distribuidores envolvidos. Depois devem procurar os tier 1”.

“There could be problems with small and midsize distributors,” he said. Besides its 10 Tier One partners and two principal distributors, it has hundreds of smaller sales channels. “They may have a temporary problem with deliveries, today, and not be able to buy from the distributors involved. They should try the Tier One providers instead.”

Apesar do volume de negócios pontual que pode ser dirigido a sua empresa, Vedovato considera o episódio prejudicial. “Esse caso compromete a imagem do mercado.”

Despite the volume of business that might be directed at his firm, Vedovato considers the episode harmful. “This case compromises the image of the sector.”

It is midnight in the garden of good and evil.

Do you know what your lower-tier resellers are up to at this moment?

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