• United States
Senior U.S. Correspondent

Cisco takes aim at new competitors

Jan 13, 20033 mins
Cisco SystemsWi-Fi

Cisco signals its readiness to take on new rivals that are moving into the network giant’s traditional network equipment markets

SCOTTSDALE, ARIZ. – Cisco last week signaled its readiness to take on new rivals, such as Dell, that are moving into the network giant’s traditional network equipment markets.

In what seemed a shift from the tone of Cisco’s analyst conference last month, Cisco President and CEO John Chambers told financial analysts last week at the Morgan Stanley Software, Services, Internet & Networking Conference that he sees challengers moving up.

“Our next generation of competition is going to come from below,” Chambers said in answer to a question at the conference in Scottsdale.

Asked about Dell and Chinese vendor Huawei Technologies, he acknowledged those companies were among the threats and that other companies, particularly other Asian vendors, also would be part of the fray.

Last month, Chambers downplayed the idea of network gear becoming a commodity business in which newcomers could succeed with lower prices, saying a big vendor still has advantages. The ability to make a wide range of integrated gear across enterprise and carrier networks, and to innovate in high-end features such as security, was more important than price to most customers, Chambers and other executives said.

Last week he seemed to signal a different approach.

“We’re going to move downmarket,” Chambers said. “We will not just play defense; we will play offense as well.”

Among the company’s upcoming moves will be a $150 million advertising campaign.

Beyond that, industry analysts doubted that Chambers’ comment hinted at significant changes in Cisco’s product lineup. Instead, they pointed to the company’s moves to cut costs and possibly initiate a new online direct sales channel, similar to Dell’s, intended for small and midsize businesses.

“Dell is very much going after the commodity product space. . . . That’s a threat to Cisco unless Cisco can counter Dell both in terms of cost of products shipped [and] channels,” said David Passmore, research director at Burton Group.

For relatively simple equipment such as Ethernet switches for small and midsize companies, a combination of Cisco’s advanced features and an easier way to buy its products might help the company attract or keep smaller customers, says Tere’ Bracco, an enterprise network analyst at Current Analysis.

“I don’t expect them to sell to consumers, but I do expect them to have an online Web presence in addition to their other channels,” Bracco says.

Lawson is a correspondent with the IDG News Service’s San Francisco bureau.