Does Huawei have the most potential to eat Cisco's lunch?

Earlier this week I had a conversation with an industry analyst regarding Cisco's strategy and it got me thinking about who has the most potential to eat Cisco's lunch. My conclusion? Huawei Why? Well, a couple of things, so lets go through my list: 1. Infonetics Research Optical Network Hardware Report:

Huawei takes the lead in optical network hardware market in 1Q09 Preliminary results from Infonetics’ Optical Network Hardware report show that Huawei increased its revenue market share to 23% for the first quarter of 2009, just ahead of Alcatel-Lucent, which maintains the overall lead on an annualized basis. "Since 2002, the optical network market has grown at a 8% compound annual growth rate, but for most vendors it looked more like 6% because Huawei absorbed a significant portion of the annualized gains. I don’t see this trend ending anytime soon, and if it doesn’t, Huawei could be the overall market leader for 2009," said Andrew Schmitt - Infonetics Research's directing analyst at for Optical. The report also shows worldwide optical network hardware sales dropped 22% sequentially in 1Q09, from $4.0 billion to $3.1 billion.

2. Cisco's Disjointed Management Structure and Strategy: It's my personal opinion that the late John Lennon balanced out his songwriting companion Paul McCartney's flaky songwriting tendencies and vice versa, much as I believe that former Cisco Chairman John Morgridge most likely balanced out Cisco CEO John Chambers and vice versa. Cisco's new management structure without Morgridge balancing out Chambers: For all its bravado about its new management structure detailed above, Cisco's financial results do not appear to be immune to the same ailments that trouble most businesses who simply have "ordinary" management structures. For example, during the first 9 months of its FY09, Cisco net sales plummeted $1.59 billion while simultaneously Cisco net income sank $985 million. Perhaps Cisco is no longer Cisco? But instead a wannabe Google or a wannabe Apple because it seems to me that Cisco believes the grass is greener or dare I say, way cooler in other yards! In my mind, Cisco could be drifting away from what made it successful because its M&A leader Ned Hooper also happens to be its consumer leader.

Ned Hooper - Cisco SVP of Corp Dev and Consumer Group discusses Cisco's strategic direction:

3. A Dysfunctional Cisco Channel Partner Model: Today in my opinion, Cisco certainly has no problem throwing important partners like HP and IBM under the bus, nor does Cisco have a problem making acquistions that do not add value to its channel partners. Additonally, it also appears to me that Cisco's much ballyhooed Partner Talent Portal is a total flop! Earlier this week I learned that many Cisco channel partners did not get an invite to next month's Cisco Partner Summit in Boston. Curious, I contacted Cisco for an explanation and here's the response:

"With more than 60,000 Cisco channel partners around the world, it isn’t realistic to invite all of our partners to Cisco Partner Summit. The 'live' event is primarily focused on Cisco Gold, Silver and Premier Certified Partners. We anticipate that 1,500 partner executives will join Cisco in Boston, with thousands more attending virtual through Cisco Partner Space, our virtual environment."

Feedback from a Cisco partner regarding Cisco's explanation:

"Thanks for the info Brad, it’s all BS from Cisco. Yep, they don’t care about the other partners who they say do SMB as Select Partners. They talk a good game but don’t want to meet or do anything for you. We are dropping them as a partner after this year."

4. In 2008, Huawei the Plumber Grew Sales Almost $1 Billion More Than Cisco the Consumer Chaser: Huawei 2008 Financial Results: Source: Huawei Huawei the plumber grew sales in 2008 by $5.48 billion and net income by $194 million. Cisco 2008 Financial Results: Source: U.S. Securities and Exchange Commission Cisco the consumer chaser in 2008 grew sales by $4.6 billion and net income by a whopping $719 million (much of it sheltered from U.S. taxes). Naturally, I'm totally stunned by Huawei's 2008 success while earlier today BradReese.Com Sales Manager Reggie Grant sent to me the following Barron's web page link: Time for Empathetic Capitalism It's about Chinese Prime Minister Wen Jiabao:

"The capitalists who create value for enough people by truly and sustainably enhancing their well-being will be rewarded."

Imagine if you can the totally improbable: Cisco having its lunch eaten by Chinese Capitalists who truly understand Capitalism! Related story: Huawei moves up in networking's big leagues

What's your opinion, does Huawei have the most potential to eat Cisco's lunch? BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware Contact: Brad Reese | Twitter:

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