10/19/2009
Financial Times – San Francisco Bureau
Cisco is to overhaul one of its core products for the first time in five years in an attempt to show that it has not abandoned its heartland for flashier markets.
The networking equipment maker will on Monday announce it is releasing three new models of routers aimed at small- and mid-sized businesses and branch offices, refreshing a line that brings in billions of dollars every year.
Cisco has about 80 per cent of the market for these basic machines, which move data around small networks, making them the world’s most widely sold routers – it has marketed about 7m since 2004.
The move should help Cisco to fend off its rivals with cheaper products , notably 3Com, which has been making inroads, particularly in China.
Joe Skorupa, a Gartner analyst, said that 3Com “has a credible line of routers and it’s well respected outside of North America”.
He added: “They’re moving a lot of iron around the world and Cisco doesn’t want to cede that business.”
In addition to market pressure from below, Cisco has faced questions about its focus. The company was built on the back of routers and switches, but in recent years the hardware maker has expanded, mainly through acquisitions.
Cisco last overhauled its entry-level routers in 2004 after it had come under attack from start-ups promising double the performance at the same price.
“Cisco learnt the last time that waiting seven or eight years was too long,” said Shin Umeda, analyst at Dell’Oro Group.
Cisco is, however, still giving its attention and dollars to other projects.
In the past month, the company has offered $2.9bn for Starent Networks, which delivers equipment to big wireless network carriers who need it for managing the video glut, and $3bn for Tandberg, a Norwegian video conferencing group, to round out its portfolio of video, messaging and other collaboration tools.
But the company says it has improved its ability to integrate the most popular of its acquired technologies with the basic networking tools it sells every day.
Tony Bates, senior vice-president at Cisco, said: “The core strategy of the company has been to build great networking products, move into adjacent services, and add them back in.”
Mr Bates, who was recently put in charge of equipment sold to big business customers, added: “We did it with voice, adding that to data to make unified communications, and now video is becoming very, very important.”
The newest versions of what Cisco calls integrated service routers are three times faster, include multiple network processors and are optimised for video , reducing jitter and giving pictures priority over other types of traffic.
The pricing on the three models runs from about $1,600 to $16,000.
