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Managing Editor

Chambers: Cisco can improve with service providers

Nov 12, 20023 mins
Cisco SystemsWi-Fi

Cisco “has a long way to go” in providing the breadth of product offerings service providers require for offering new services and generating revenue, CEO John Chambers admitted to investors today.

At the UBS Warburg Global Telecom conference in New York, Chambers gave attendees a candid assessment of Cisco progress in its key markets, including storage, voice, security and wireless. While awarding his company “high marks” in enterprise voice, Chambers acknowledged room for improvement in service provider voice offerings.

“We have a ways to go in the service provider market,” Chambers admitted. “Service providers are starting to take hold but we need more of a systems end-to-end architecture.”

Cisco has such an architecture – its AVVID blueprint, which stands for Architecture for Voice, Video and Integrated Data – for enterprises.

Chambers also said the end-to-end systems architecture for service providers is needed to help Cisco grow its service provider business from its current 20% of revenue to 40% to 50% in five years. Cisco derived about 40% of its business from service provider as recently as three years ago before the telecom industry went into its economic slump underscored by sharply reduced capital spending.

Chambers reiterated Cisco’s commitment to the service provider market and its intention to play in a large number of product and market segments, both high margin and low margin. One particular challenge is to add high margin routing and switching intelligence to low margin optical transport gear in order to make optical a higher margin offering.

Cisco is also looking to transition service providers from a commodity transport business model to an ostensibly more lucrative value-added application and integration business in order to create more demand for Cisco product in that market, Chambers said.

In the past, Chambers admitted that Cisco had not been customer driven in past dealings with service providers, especially with incumbent local exchange carriers, regional Bell operating companies and post, telegraph and telephone administrations. Chambers reiterated that admission today and said it is now a key driver of Cisco’s strategy. 

“The mistakes we have made have been when we haven’t listened to the customer,” Chambers said.

Chambers also said Cisco could better its product consolidation pace during the current challenging economy.

“We don’t need five midrange routers,” he said.

Despite the need for improvement, Cisco overall business has increased 9% between the fourth quarter of 2001 and the third quarter of 2002 while its top 10 competitors combined – which include telecom-focused companies such as Lucent, Nortel, Ciena, Redback and Sycamore – experienced a 48% drop during that span.

Chambers also said Cisco’s market cap currently stands at $135 billion vs. the combined $126 billion valuation of its top 10 competitors.

Managing Editor

Jim Duffy has been covering technology for over 28 years, 23 at Network World. He covers enterprise networking infrastructure, including routers and switches. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy and at

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