Google, Adobe Eye China Link in Computer Hacks

Search giant hacked, now thinking of quitting the country, while software giant reports similar attack

By Scott Budman and Owen Thomas
|  Wednesday, Jan 13, 2010  |  Updated 7:45 AM PDT
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Google chief executive Eric Schmidt spells Chinese characters 'Gu Ge' at the inauguration of the company new Chinese brand name April 12, 2006 in Beijing, China. Google said it has adopted the Chinese-language brand name 'Gu Ge' for its Chinese operations, with Google chief executive Eric Schmidt saying the new name demonstrated Google's commitment to China.

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Google may be on the verge of taking an extraordinary step for a giant American business: Pulling out of the Chinese market.

The Silicon Valley search giant confirms as much in a blog post with the deceptively anodyne title "A new approach to China."

In it, Google details recent attacks against its systems apparently seeking access to "Gmail accounts of Chinese human rights activists." A related post admits, shockingly, that some of Google's "intellectual property" -- the software code and other technical secrets that let it run its business -- was "compromised."

Google says that some 20 publicly traded companies were targeted by the attack across a wide array of industries. So far, none have come forward save possibly for Adobe, which stated Tuesday that it, too, had recently been targeted by hackers. Adobe did not go into as much detail about the nature of its attack.

It's because of these breaches, Google chief legal officer David Drummond wrote, that Google is rethinking its business strategy in China, even possibly "having to shut down Google.cn, and potentially our offices in China."

For now, Google is playing chicken with China's censorious regime, removing the filters it has applied to Web searches to block controversial matter like the Tiananmen massacre -- and essentially daring the Chinese government to do something about it.

While Google hasn't gone as far as saying that the Chinese government is behind the hacking incident, its response seems to tie the hacking incident with a seemingly unrelated policy of government censorship. That suggests Google knows more than it's saying.

Given the current global business market, where American businesses as diverse as Coca-Cola and Applied Materials do far more business overseas than in the US itself, it's a gutsy move to even consider closing the virtual doors on business in China.

In some ways it's not a hard move for Google to make. It has struggled to win market share away from Baidu, the dominant search engine in China, and its business in the country is currently "immaterial" to its financial results. But there is still a ton of potential revenue to be tapped, with a billion potential searchers to attract.

Google and its chief Web rival Yahoo have both run into public-relations trouble in China over the course of the past decade, largely because of China's policies on censorship and its harsh treatment of dissidents. Yahoo has been criticized for turning over critics' emails, while Google has been criticized for bending it's "don't be evil" philosophy to accommodate China's Web censorship.

The biggest audience for Google's threatened China pullout may not actually be China's Politburo. Instead, it's the idealistic young engineers Google currently employs and hopes to recruit. Thriving on the Web's culture of openness, they must see Google's accommodation of China as a cynical business move. By saying it's had enough and drawing a line in the silicon sand, Google is saying that "don't be evil" still means something.

It's also an implicit challenge to the rest of corporate America: Will the other targets of this attack stay silent as they get hacked, filtered, blocked, and censored? Or will they, too, speak up?

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