Defending Cisco: A Turn Around For the US and Entire Industry
There seems to be no stopping the negative press and ensuing media pile on, old and new, regarding the problems at Cisco. Some have suggested Cisco is “too big to succeed” while others question whether Cisco is more valuable as a sum of their parts rather than the sum of the whole company. At a time of increasing competition, a changing IT paradigm, and a struggling economy, this faithful IT bellwether is clearly in need of a makeover. However, the stakes are much greater than simply restoring faith in their stock and has broader ramifications for the entire technology sector.
Many have pointed to Cisco’s shutdown of their Pure Digital division, better know as Flip, as proof of Cisco’s failed acquisition strategy. In reality, Flip isn’t a failure and continues to be a favorite amongst families, athletes, and more. Instead, Flip is a victim of Cisco’s need to quickly shed costs while ensuring that the technology does not fall into their competitor’s hands. Additionally, it showcases Cisco’s lack of a coherent consumer strategy and a missed opportunity to capitalize on Flip’s users and its Cloud potential.
Others, point to Cisco’s lower than expected margins within their switching products as proof of Cisco’s lack of planning for the eventual EOL/EOS of the Catalyst 6500 Series switches. Developing a successor to the Catalyst 6500 was a daunting task that was fraught with risk; just look how long it took Juniper to develop their EX line of switches. In the end, Cisco developed a heck of a switch with the Nexus 7000 Series. The 7000 Series is a worthy successor to the Catalyst 6500 Series, even if Cisco continues to call them “complimentary”.
Then what’s behind the lower margins? Simple, competitive pressures combined with the dawning of the next generation datacenter architecture and Cloud computing. In the enterprise, Cisco faces ambitions rivals such as Juniper, HP, Arista Networks, and more. In the Cloud, Cisco faces the same competitors plus homegrown products and the rise of OpenFlow. With the dawning of network processors and the rise of Open Source Software within Networking, Cisco is facing a new reality of lower margins and rapid feature development.Continued on the next page