Did the market for Cisco TelePresence hit a brick wall?
BusinessWeek reveals an interesting motive as to why Cisco purchased Tandberg.
By Brad Reese on Mon, 10/05/09 - 12:23am.
Cisco's most recent Form 10-K (page 21) filed with the U.S. Securities and Exchange Commission, seems to alarmingly warn investors:
The products and technologies that we identify as "emerging technologies," such as Cisco TelePresence systems, or "advanced technologies" may not prove to have the market success we anticipate, and we may not successfully identify and invest in other emerging or advanced technologies.
For financial reporting purposes, Cisco lumps its TelePresence products under Other Products. And interestingly enough, it was Cisco's Other Products which experienced the greatest percentage drop in sales (-26.1%) for Cisco's fiscal year 2009.
Cisco Net Product Sales by Groups of Similar Products (page 19)
Source: U.S. Securities and Exchange Commission
Curiously and simultaneously, Cisco also stated in its recent Form 10-K filing (page 20) with the SEC:
The decrease in other product revenue in fiscal 2009 compared with fiscal 2008 was primarily due to the decline in sales of our cable, optical, and service provider voice products, partially offset by increased sales of emerging technology products such as Cisco TelePresence systems.
My interpretation of the financial meaning of the words "partially offset," could be as little as $100, especially when Cisco purposely omits an actual dollar amount.
So why am I suspicious that Cisco omitted an actual dollar amount for its TelePresence sales increase?
Well, mostly because Cisco has never been shy about revealing the actual dollar amount increases and/or decreases of its product sales, for example (page 20):
Sales of unified communications products increased by approximately $30 million, primarily due to increased adoption of our web-based collaborative applications and related conferencing media.
Andrew Davis - Senior Partner of independent market research firm - Wainhouse Research, was quoted in a recent BusinessWeek article regarding his thoughts on the market potential of Cisco TelePresence:
"Cisco's approach was definitely going to hit a brick wall.
"There are only so many CEOs you can take out on the golf course and sell a TelePresence system to."
According to the same BusinessWeek article, Cisco's huge marketing push behind TelePresence has achieved fewer than 500 customers.
BusinessWeek then gave the harsh take of Craig Malloy - the CEO and Co-Founder of Cisco TelePresence competitor - LifeSize Communications, who claimed that in order to win business, Cisco has had to slash the price or even give away TelePresence systems to customers buying other Cisco products. Malloy then stated, "That's a reason why they sometimes couldn't give TelePresence away—because it wouldn't work with anything anyone else had."
BusinessWeek also duly noted Cisco's denial of Malloy's claim.
Nevertheless despite Cisco's denial, The New York Times reported that Sean Tyrrell, a Tandberg global account director, also confirmed Cisco has been giving away TelePresence:
If Cisco’s Telepresence is soooo good, why do they have to always give it away? In every global account I am involved in, Cisco gives these things away. The fact is they are expensive to operate, limited in that you can only see a few sites at a time, they ought to call it Tele-Absence….They give it away because for every $ companies spend on this, they’ll spend seven times that amount on network upgrades.
However, it's my opinion that Cisco's purchase of Tandberg will be a financial disaster for Tandberg's platinum, premier and authorized partners.
And why do I believe that?
Because Cisco is famous for offering its channel partners some of the lowest profit margins in the industry.
Furthermore, according to yet another quote from Cisco TelePresence competitor - LifeSize Communications, only this time in a ChannelWeb story:
"Video communication is a very profitable space in which to be a VAR, and generally speaking, in this space, resellers have been making margins in the 20 to 30 point range. That's not the world of being a Cisco partner -- you make most of your margin there on services."
I just can't see Cisco allowing its "army" of authorized resellers to earn 20 to 30 points!
What's your take, do you believe Tandberg channel partners will experience substantial profit margin haircuts under Cisco's ownership of Tandberg?
Also, do you think the market for Cisco TelePresence hit a brick wall?
BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware
Contact: Brad Reese | Twitter: http://twitter.com/BradReese
- Why aren't more people using Cisco's IP SLA?
- Juniper is about to make a strategic blunder
- A 10 year historical perspective on the worldwide CCIE count
- Zero Security CCIEs have been added to the worldwide CCIE count over the past three months
- John Chambers slams Cisco with $2.3 million in private jet expense
- Cisco's taking a beating in the Carrier Ethernet Switch/Router market
- Should you steer clear of grey market Cisco CCIE training companies?
- What's the biggest firewall issue for enterprises?
- Are Janus Friis, Niklas Zennstrom and Mike Volpi the three stooges of tech litigation?
- Vote for the best Cisco NetFlow hip-hop video on YouTube
- Cisco retail collaboration benefits calculator
- Skype is on its way to becoming one of the most important companies in the world
- The sordid tale of Cisco's new board director Arun Sarin and disgraced Wall Street analyst Henry Blodget
- Is the new Cisco Product Quick Reference Guide destined for the New York Times Best Seller list?
- Can you see John Chambers directing Cisco to buy Alcatel-Lucent?
- F5 clobbers Cisco in application delivery controller market share
- Test Cisco NetFlow collectors and exporters with a free tool kit called Flowalyzer
- Cisco NetFlow is a must have for managing virtual applications in the cloud
- Plixer offers free tool that brings Netflow analysis to Cisco ASA firewall
- View Brad Reese on Cisco Story Archives
- About Brad Reese on Cisco
Brad Reese cofounded BradReese.Com Cisco Refurbished, which enables affordable Cisco networks globally by assuring customer satisfaction with guaranteed one year warranties on both Cisco Repair as well as Refurbished Cisco.
Don't be shy, contact Brad Reese online or call him Toll Free:
866-864-0506
International callers may wish to call Brad by dialing:
850-364-4115
- Archives
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- On The Web
Sponsored Links
- FREE LCD Console and 16 node central management tool with purchase of any KN4 series IP KVM- ATEN
- Drive down operating expenses and mitigate risk with app centralization - Live May 12.- Juniper Networks
- The Next Generation of Content Security Has Arrived! Learn More!- Websense, Inc.
- Connexion saves costs with Microsoft & Novell- Novell Microsoft
- Masters of Virtualization and Cloud Computing- Trend Micro
- Hitachi IT Operations Analyzer—30-day free trial- Hitachi Data Systems
- Are you gambling with your data? It is at risk. Find out and protect it.- Ultrium LTO
- CA ARCserve r12.5 is More Than Backup! Download Trial Version Today- CA
- Take the Netezza TwinFin TestDrive!- Netezza
- Getting to One 10-minute Webcast, Cloud Computing: Beyond the Hype- Novell
-
Network World, Inc
The Leader in Network Knowledge
Cisco's whole gamble on video
I never really got Cisco's whole bet on video, especially in the enterprise space. (Yes, collaboration has taken off in the consumer space with portals like YouTube, but in the enterprise space, it's a far cry).
Cisco's past few acquisitions has had a "video" theme (a la WebEx, Pure Digital and now Tandberg). Cisco even filed some device application for the Flip with the FCC just last week (maybe we'll see an internet capable Flip cam?).
Cisco's whole selling point is: corporate/enterprise customers will opt to "telepresence" instead of travelling. This might work for *some* BUs but for things like systems integration, sales, delivery, etc. there's no freakin' way you can do anything by video. Polycom is in the same business line as Tandberg, but Polycom's focus is more personal device oriented.
Here's my question: why the hell would small businesses pay $$$ for crap like WebEx when there's sooooo many free alternatives that support video? e.g. Skype, Yuguma, etc.
On the consumer side, again, why the heck would someone bother wasting high bandwidth and keep a video phone in their homes when 4G/LTE wireless devices will support real-time video???
There's already talks that the prototype of the Apple iPhone 4G will have a real-time video phone capabilities to be deployed on 4G networks. Looks like Cisco will get PWN3D by Apple once again. First the iPod blows a gaping hole into Cisco's Flip (aka. "The Flop"), and now it seems like the iPhone will put Cisco to shame with the video commumunication.
PS -- We all know what a massive failure Cisco's version of the "iPhone" was.... LMAO!!!!!!!!!!!!!!!!!! Cisco got bitch-slapped by Apple on that one.
Long history between iPhone and Cisco's CTO
Hi Renegade,
There's a long history between the iPhone and Cisco's CTO:
Apple iPhone doubts of Cisco CTO Padmasree Warrior
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
So you believe that the
So you believe that the video conferencing market is going to be stalled for more than 2 years waiting for an LTE iPhone that might come out in 2012 or later?
http://www.unstrung.com/document.asp?doc_id=182625&
Regus was the big lose for Cisco
When Cisco lost Regus and then when the Regus CEO went public with problems with the system, that was the start of the downfall. Cisco should have purchased LifeSize instead, it would have been a better play.
Procter & Gamble had issues with Cisco TelePresence too
Procter & Gamble had issues with Cisco TelePresence too:
P & G continued:
So it appears the "true cost" of Cisco TelePresence (P&G plans to turn up 45 TelePresence studios altogether comprised of Cisco 3000 and 1000 series systems, which cost $299,000 and $79,000, respectively) goes far beyond the Cisco TelePresence equipment itself.
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Network integration
So is the point that to add Telepresence a company needs additional bandwidth and possible upgrades to it's network? Um.. duh?
Umm duh? Just "network
Umm duh? Just "network upgrades?" You make it sound so benign. These days we are grateful for an IOS that runs the features we need without crashing. Despite pipedreams about bandwidth getting cheaper and becoming abundant, it has not.
We evaluated telepresence and in order to support it, we would have had to spend close to 6 or 7 times the cost of telepresence just in capital expense to get the network to support!! Not to mention the cost of the circuits which were double the cost of telepresence yearly.
Forget it!
Plug it in an ignore it?
If your network is so far behind being able to support video that it would take 6x the cost of a Telepresence system to support maybe network maintenance isn't a core competency of your company?
Like every complex system networks require care and maintenance. Ignoring them, like any other part of your infrastructure, then being unable to turn up new services shouldn't be a surprise.
Interesting Cisco sales pitch
That's an interesting Cisco sales pitch.
With that kind of arrogance, I suggest you carefully read:
Beware Cisco of how the mighty fall
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Or is it really? Its simply
Or is it really? Its simply stating that a network should be a constantly evolving device to support business needs. Do you think just because he chose Telepresence over any other similar conferencing application that the cost to bring the network up to speed would have been any different for high definition video applications? I think not. It's pretty simple Brad. If you have a network that is still running fine with a network based on bus topology, fine. Just don't whine and moan when someone comes in with an application that requires much higher needs.
After all, what do you expect? 56k HD video? Perhaps you should heed your own advice before your obvious overconfidence cases you to fall.
Post new comment