Cisco takes aim at new competitors

Cisco Systems Inc. Tuesday signaled 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 defense, we will play offense 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.

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