Cisco switch users irked by long delays

There’s a TV advertisement for a candy bar that asks, “Not going anywhere?” and suggests burning idle time by chomping on the bar.

Well there are no snickers among Cisco Systems Inc. users trying to get their hands on a Catalyst 6000 LAN switch. Lead times for delivery of the product have ballooned from three weeks to 12 due to a shortage of components from Cisco’s suppliers, namely IBM Corp.

The situation is delaying the deployment schedule of some of Cisco’s largest customers and keeping them from building out their networks. The delays could also slow sales and affect the quarterly earnings of the high-tech bellwether and send a ripple effect throughout the industry.

“We are being told of delays of over three months for some products,” says a user at a Fortune 100 high-tech product manufacturer in New England. “[Our] schedule is in trouble because some of the boxes on our shopping list have extremely long lead times. We may wind up lowering our standards to buy equipment that is at least available. This hardly engenders loyalty to the Cisco line.”

The Catalyst 6000 has annual bookings of US$5 billion, according to Cisco. The Layer 3 switch has quickly become Cisco’s flagship line since its introduction two years ago and is the foundation of Cisco’s infrastructure offerings for converged IP telephony networks. The Catalyst 6000 competes with Foundry Networks’ BigIron, Extreme Networks’ BlackDiamond, Enterasys Networks’ SmartSwitch Router and Nortel Networks’ Passport 8600 offerings.

PeopleSoft Inc. in Pleasanton, Calif., is a large Catalyst 6000 shop that has had to rely on Cisco distributors because it cannot get the switch fast enough directly from Cisco.

“We had a couple of orders that got strung out before we realized what was going on,” says Stan Christensen, PeopleSoft director of network engineering. “Cisco suggested that we keep a second partner in line as far as someone who keeps certain stuff in stock. So we’ve been addressing it by just going to some of the channel and picking up product there.”

Another user is working closely with Cisco to lessen the impact of the long lead time.

“This is a popular switch and it seems everyone wants one,” says Doyle Friskney, director of communications and network systems at the University of Kentucky in Lexington. “Our salesman takes great efforts to lower our quoted lead times to ensure we can complete our project on time.”

Wall Street investment firm UBS Warburg says the lengthy lead time is due to a lack of Application Specific Integrated Circuits from IBM, which have been on allocation for the past few months. But availability of these components has “greatly improved” in the last month, the firm notes.

“This should help Cisco more easily ship its Catalyst 6000 series of products,” the firm stated in a recent report.

Cisco would neither confirm nor deny that IBM is a supplier for the Catalyst 6000. IBM confirmed that it does supply microelectronics to Cisco but would not comment on the Catalyst 6000 specifically, nor on this particular situation.

But Cisco did acknowledge that a component shortage situation is behind the extended lead times that some customers – not all – may experience.

“[The lead time] is dependent on the requirements of customers and the configuration and solution they’re looking to deploy,” says Ed Chapman, director of marketing for the Catalyst 6000. “In worst cases it can be 10 to 12 weeks currently, but many customers are receiving products ahead of this.”

To ensure a ready supply of components and to reduce lead times, Cisco has signed long-term agreements with suppliers and has invested in additional manufacturing capacity, Chapman says.

“We have strong commitments from our suppliers and feel, based upon their feedback, that we can anticipate a decline in our lead times to customers over the next few months,” Chapman says. “In general, we are seeing solid improvement in lead times overall.”

Chapman says Cisco has not seen a decline in Catalyst 6000 sales due to the component shortage/lead time issue although Cisco CEO John Chambers did say last week that Cisco’s current quarter has been more challenging than anticipated due to overall economic conditions.

Indeed, UBS Warburg has seen a slowdown in overall sales through Cisco distributors, which may be due in part to the long lead time for the Catalyst 6000.

“Our research suggests there have been some signs of some slowing of sales through distributors,” the firm stated in its report. “This may be more alarming, as it may indicate a slowing in demand. It may also indicate lack of availability of high-end products like the Catalyst 6000 series given certain component shortages.”

UBS has lowered its second-quarter 2001 revenue projections for Cisco from US$7.17 billion to US$7.04 billion.

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