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As network gear transitions, will success beget success?

Fri, 11/30/2001 - 7:00pm
Duffy Hayes

Google Factor: 280,00

"Where do we go from here?" It's a question many network equipment makers are asking in this fiscally-constrained era of scaled back infrastructure spending, but it is of critical importance to market leading Cisco Systems.

The world's largest maker of data networking gear, Cisco has seen its fortunes slide with the overall decline in IT spending. The company posted a net loss of $1 billion in fiscal 2001, ended July 28, which is a complete reversal of the company's fortunes last year, when it reported income of $2.67 billion.

But perhaps Cisco's strength lies in its diversification. And it appears that a big part of its strategy for future success lies in cleaning up its house, and figuring out exactly which business divisions hold the most promise in the immediate future.

Which is why Cisco is reorganizing in the face of adversity, hoping to streamline its business into select profitable technologies. Its new technology structure will look like this: access; aggregations; core routing; Ethernet access; Internet switching and services; network operating technologies; network management services; optical; storage; voice; and wireless. (Whew!)

Overall, Cisco's business breaks down generally to about 70 percent corporate business, and about 30 percent from telecom service providers. With service providers, Cisco perhaps faces its greatest challenge in keeping the market share it has already gained. Today's headends are marked with quite a bit of Cisco gear; the 7200 series of headend equipment has been a workhorse line for cable operators in the past. But the past is just that, and like in other market segments where Cisco has a presence, it faces real competition from more agile upstarts. As operators look to replace legacy headend equipment to meet new DOCSIS standards and to offer more advanced services, Cisco risks being left behind offering outdated gear. Though its acquisition binge has obviously cooled, it may need to acquire one of these smaller upstarts to stay in the lead.

Voice, specifically VoIP technologies, is an area Cisco has a fine focus on these days. In just six months, it has released more than 20 new IP telephony products aimed at providers and enterprises alike. On the packet telephony side, it's developing SIP gateways that enable current H.323 customers to accept SIP calls.

One area Cisco sees as immediately high-growth is in wireless LAN technology, specifically with the advent of 802.11a and b protocol products. Cisco released the Airo- net 350 series early this year, aimed at enterprise-grade applications, which included many security features so far absent from the first-to-market 802.11 products.

Network storage is another area Cisco sees as high growth, and will likely get a lot of internal attention over the next year. Other areas within the company's litany of technologies–like optical and fixed wireless–are likely to be shelved going forward as competition in these areas grows with a flood of new entrants.

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