Cisco takes aim at new competitors

Cisco Systems Inc. Tuesday signalled its readiness to take on new rivals, such as Dell Computer Corp., that are moving into Cisco’s traditional network equipment markets.

In what seemed a shift from the tone of Cisco’s analyst conference last month, Cisco President and Chief Executive Officer John Chambers told financial analysts Tuesday 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 analyst conference in Scottsdale, Arizona, which was monitored via webcast. Asked about Dell and Chinese vendor Huawei Technologies Co. Ltd., he acknowledged those companies were among the threats and that other companies, particularly other Asian vendors, would be part of the fray as well.

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

Tuesday, he seemed to signal a different approach.

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

Among the company’s upcoming moves will be a US$150 million advertising campaign this year to build Cisco’s brand.

Beyond that, industry analysts interviewed Tuesday doubted that Chambers’ comment hinted at significant changes in its product lineup. Instead, they pointed to Cisco’s moves to cut its own costs and possibly a new online direct sales channel, similar to Dell’s, intended for small and medium-sized 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) also channels,” said David Passmore, research director at The Burton Group Corp., in Midvale, Utah.

For relatively simple equipment such as Ethernet switches for small and medium-sized enterprises, a combination of Cisco’s advanced features and an easier way to buy its products might help the company attract or keep smaller customers, said Tere Bracco, an enterprise network analyst at Sterling, Virginia, market research company Current Analysis Inc.

“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 said.

Asked about concerns that companies such as Huawei might be competing unfairly by violating Cisco’s intellectual property rights, Chambers said he believed the Chinese government and World Trade Organization would “do the right thing” to prevent or stop unfair business practices.

Even as Chambers took aim at the rising competition, another vendor, traditionally low-end equipment maker Linksys Group Inc., Tuesday took a step up.

The Irvine, California, company introduced a set of Ethernet switches that offer both switching and routing capabilities as well as speeds up to Gigabit Ethernet.

Linksys made its name as a provider of low-cost hardware for home and small-business networks, but its latest products are designed for both client-to-server and server-to-server connections in small and medium-sized businesses and corporate workgroups.

Linksys introduced two network offerings with Layer 2 switching capability: a 24-port 10/100M bps (bits per second) Ethernet switch with two expansion slots, with an estimated street price of $699.99, and a 4-port 10/100/1000 M bps Ethernet switch with four expansion slots, priced at $999.99.

It also rolled out two products with Layer 3 IP routing capability: a 24-port 10/100M bps Ethernet switch with two fixed Gigabit Ethernet ports, carrying an estimated price of $869.99, and a four-port 10/100/1000M bps Ethernet switch with four expansion slots, priced at about $499.99.

At the same time it introduced two modules for the expandable switches, one with a 10/100/1000M bps port and one with a 10/100M bps fibre port.

All the new switches include management features, such as MAC (Media Access Control) address filtering and the capability to monitor individual ports both on-site and remotely via a Web browser. They are available now through resellers and systems integrators.

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