China’s procurement agency recently told government departments to stop buying antivirus software from Symantec Corp. (SYMC) and Kaspersky Lab because of security concerns, people familiar with the matter said.
The exclusion follows a notice from the Public Security Ministry in June that Symantec software had security vulnerabilities, the people said, asking not to be identified because the information hasn’t been made public. The procurement agency removed the companies’ antivirus programs from its list of approved software, which includes products offered by domestic companies including Qihoo 360 Technology Co. (QIHU) and Kingsoft Corp. (3888), the people said.
China has stepped up scrutiny of foreign companies in the wake of Edward Snowden’s revelations of a National Security Agency spying program and the indictments of five Chinese military officers for allegedly stealing corporate secrets. Google Inc. and Apple Inc. (AAPL) have been criticized by state media for allegedly cooperating with U.S. spying and Microsoft Corp. was excluded from a government purchasing order.
“Symantec does not put hidden functionality or back doors into any of its technologies -– not for the NSA or any other government entities,” the company said in an e-mailed statement today.
The exclusion only applies to “certain types of procurement,” and Symantec will continue to bid on government projects in China, where the company has had a presence for more than 15 years, Kristen Batch, a spokeswoman, said. Symantec’s sales in Asia last fiscal year totaled $1.17 billion, or 17.5 percent of revenue.
China “temporarily rescinded its endorsements of all foreign security providers,” Kaspersky Lab’s press office said in an e-mailed statement. This restriction applies to central-government institutions and not regional governments or large enterprises, it said.
“We are investigating and engaging in conversations with Chinese authorities on the matter,” the company said, adding that it’s “ too premature” to give more details.
The Public Security Ministry notice said Symantec’s Data Loss Prevention software contained high-risk security loopholes including backdoors that could allow outside access, said another person who also asked not to be identified because the order hasn’t been made public.
Beijing Youth Daily reported on Aug. 1 that Symantec and Kaspersky have been excluded by the government. Shares of Mountain View, California-based Symantec fell 2.1 percent the same day in New York, the biggest drop since March, to close at $23.17.
China said in May it would vet technology companies operating in the country for potential national-security breaches after the government threatened retaliation for the U.S. indictment of the Chinese officers.