A muscular Chinese competitor has set up shop in North America - and it's got Nortel and Cisco in its crosshairs

June 12, 2002

5 Min Read
Has Huawei Got Cisco's Number?

Who’s Cisco Systems Inc.'s (Nasdaq: CSCO) scariest competitor right now? It's probably not Juniper Networks Inc. (Nasdaq: JNPR), Nortel Networks Corp. (NYSE/Toronto: NT), Lucent Technologies Inc. (NYSE: LU), or even Alcatel SA (NYSE: ALA; Paris: CGEP:PA).

Instead, try FutureWei.

FutureWei is the new North American communications equipment subsidiary of Chinese telecom equipment giant Huawei Technologies Co. Ltd. The company officially launched last week with a splashy booth at the Supercomm 2002 tradeshow, staffing it up with a gaggle of lithe, silver-spandex-clad models hired to hand out product literature and generate buzz.

By most accounts, it worked. Several sources have since mentioned FutureWei’s grand entrance as one of the spectacles of the industry.

“They had a big booth, they had a lot of traffic, and there was a lot of activity going on in that booth,” says Gabriel Lowy, an analyst with Crédit Lyonnais Securities Inc. who visited with FutureWei at Supercomm. “Their goal is to establish a footprint in this market.”

“Yeah, they're the ones that sell you a router for something like $600,” notes Lewis Eatherton, the former CTO of Excite@Home who now works as an independent consultant.

“They’re Cisco’s biggest fear, even though Cisco won’t admit it,” says another Wall Street analyst, asking to remain anonymous.

Huawei, FutureWei’s parent, is a telecom equipment Goliath in mainland China that has long frustrated would-be competitors in the Asian markets by producing low-cost routing, switching, and optical gear. It has more than US$3 billion in revenue and is backed by the Chinese government. With FutureWei, it’s now building a significant presence on this side of the Pacific. FutureWei has a U.S. headquarters in Texas and an office in San Jose, Calif.

It’s enough to give many North American players the chills, even if they aren’t saying so publicly.

Here’s why: FutureWei has mimicked Cisco's marketing in its North American push by offering very similar products in several categories. Here’s an example of how FutureWei matches Cisco’s offerings. Take FutureWei’s Quidway 2620 line, a lineup of low-end switch/routers for branch offices. This product matches the feature mix of Cisco’s 2600 series (which, coincidentally, includes a 2620).

Shopping for a larger enterprise switch/router? Well, Cisco has its 3600 line, including the popular 3640. Conveniently enough, FutureWei carries the Quidway 3640, which addresses the same market. Need something in the Internet core? Cisco has the 12000 series core routers, and FutureWei has its NetEngine IP Core Routers.

Though neither company publishes the prices of these products, industry sources say that FutureWei competes primarily on cost, and that its products are almost always significantly cheaper than those of its North American counterparts.

“They could probably build anything in eight months and then offer it at 40 percent of the price,” says Eatherton.

Not only has FutureWei nearly duplicated Cisco’s portfolio of routers, it’s working on a series of metropolitan optical switches that appear to match Nortel’s metro optical switch offerings -- and also have the same naming convention.

For example, Nortel has the OPTera Metro 3000, which, in the company’s marketing language, “offers an ultra-compact OC3 platform that delivers the advantages of the OPTera Metro 3000 Multiservice Platform series to customer-premises environments that require only minimal bandwidth.”

And FutureWei has the OptiX Metro 3600 and 3100, which are marketed as “10G/2.5G level MSPP [multiservice provisioning platform] units for large capacity broadband MANs at edge layers.”

Some industry sources have alleged that FutureWei is reverse-engineering both Cisco and Nortel products. One source, asking to remain unidentified, claims that Cisco is considering a lawsuit against the company, now that it’s set up shop on Cisco’s home turf.

Cisco officials say there is no legal activity and that they have a healthy respect for Huawei and its new America subsidiary, FutureWei.

“They are a competitor and we have a healthy respect for them, as we do all competitors,” insists a Cisco spokeswoman. “We have no litigation against this company.”

FutureWei did not return phone calls requesting comment.

Is Huawei playing fair? By official count, so far, yes. There's no litigation in train. And some experts say that even if FutureWei is able to market products that match Cisco's hardware, the products are still distinct on the software side.



One technical expert, speaking on background, says that there has long been talk off Huawei “knocking off” Cisco products but that charges of intellectual property theft may be overwrought. Cisco, he notes, can differentiate its product based on software, performance, and maintenance features even if Huawei can duplicate the hardware.

"A Huawei router may look like a Cisco router, but it doesn't perform like one,” says the routing expert. “High-end routing is still not anywhere near being a commodity. Huawei doesn't have the engineering experience and expertise to design good software. Cisco's been designing software since 1984.”

At any rate, some experts think it would be smarter for Cisco to partner with FutureWei, rather than pick a fight.

"If these guys align themselves with the right players, they're going to make an impact," says Crédit Lyonnais's Lowy of FutureWei.

One thing's for sure: FutureWei and parent Huawei are serious about their new push into North America. In a recent article in the South China Post, Huawei executive vice president William Xu said: "As we compete alongside the top players in the international arena, this will take us to the next level of becoming a truly global player."

— R. Scott Raynovich, US Editor, Light Reading, with additional reporting by Margaret Reardon, Senior Editor, http://www.lightreading.com

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like