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Google Practices Chinese Democracy

That Google could exit China -- following security attacks on the Gmail accounts of Chinese dissidents and human rights activists -- is obviously big world news, but what are its implications for the search giant's U.S. business operations, and overall health?

Well, contrary to comments made by Google Chief Legal Officer David Drummond, eWeek suggests that the attacks could call into question the reliability of cloud computing -- which, for Google, has emerged as a key battleground against rival Microsoft, and will represent a $14 billion industry by 2013, according to research firm Gartner.

"Google's hosts data from search, Gmail and other collaboration programs that comprise Google Apps for millions of consumers on thousands of servers in data centers all over the world as part of a cloud computing model," eWeek writes.

Speculating that, "exiting China could have severe consequences for Google's future business plans," eWeek explains that the security-breach "has the company defending the cloud computing model it lovingly nurtures."

How would Google leaving China impact its bottom line? According to estimates cited by eWeek, Google derives just 1% of its revenues from China -- or about $300 million.

Still, "Google's withdrawal from China would come with a major financial cost," according to MecuryNews.com. "While Google is a distant second to the Baidu search engine in China, the rapid growth of the Chinese market means future lost revenues could be enormous."

Furthermore, "Its future value certainly will be huge, just by virtue of the sheer size of the market," analyst Greg Sterling of Sterling Market Intelligence tells Mercury News. "The opportunity cost to Google might be many billions of dollars over time if they were to pull out -- almost certainly."

Playing a cheeky devil's advocate, Fast Company proposes: "It's also likely that some business planners inside (Google) have done extensive analysis and decided that continuing operations in China just isn't going to be profitable ... There are expensive security breaches to chase down and patch up, there's the risk that some of Google's secret search sauce will leak out and into someone else's code and there's a serious PR issue back home concerning the company's complicity in suppressing human rights."

Indeed, "Efforts to portray this as a principled stand are not wholly convincing, from a company given to self-dramatisation," the Financial Times notes. "Google's spine has almost certainly been stiffened by some increasingly anti-censorship rhetoric from the US government."

Read the whole story at eweek et al. »

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