Cisco Drops New Product Hints
Just because Cisco Systems Inc. (Nasdaq: CSCO) is talking big about Web 2.0 and "collaboration" doesn't mean it's abandoning routers and switches.
In fact, on Cisco's fourth-quarter earnings call with analysts earlier this week, executives said they've got a new Ethernet switch and a new edge router in the works.
No details came out -- and yes, it's fair to say that Cisco is working on something in either of those categories at any given time. Still, it's an interesting bit of candor from Cisco's management team, which has been in an increasingly talkative mood as the company's hot streak has worn on. (See Cisco Gets Bold With Guidance.)
In fact, the call got downright giddy at times. In discussing the CRS-1 core router, CEO John Chambers noted a four-slot version got developed "just for me." To which chief development officer Charles Giancarlo cracked, "Keeping your house warm, John."
Hilarity aside, Cisco's hints might not have been just fun and games. The vendor may want to appease critics who have noted lately that its Catalyst switches and 7600 edge routers are aging.
"Both product lines are due for a refresh," says Tim Daubenspeck, an analyst with Pacific Crest Securities Inc. "There's a lot of concern that Cisco's edge portfolio is 'old.' "
Some observers have gotten nervous that Cisco is falling behind other edge platforms. Juniper Networks Inc. (NYSE: JNPR) has beefed up its Ethernet story with the MX960, and Alcatel-Lucent (NYSE: ALU) continues to appear strong with its tandem 7750 Service Router and 7450 Ethernet Service Switch. (See Juniper Antes Up on Ethernet (Finally).)
On the edge routing side, Cisco expects the 7600 to be its workhorse for the near term; and a string of upgrades over the years, the latest having come in February, have arguably turned the 7600 into essentially a new box. (See Cisco Enhances Backhaul.)
But when asked on the call if there's more to come, Chambers didn't hesitate to say yes. Sort of. "We obviously will have in the future a next-generation edge product, but I don't want to tie it down tighter than that," he teased.
As for whether the new platform will represent a radical change, à la CRS-1, or a simple upgrade to more established routers, Chambers hedged his bets. "We will do both. We'll protect the investment customers are currently making as well as evolve to this next-generation one."
Timing of the new router isn't certain, but it seems it won't be a long wait. In a recent research note, Daubenspeck relates the story of Cisco's reaction when he'd broken news of an edge-router development getting shut down. Cisco got back to him and "state[d] emphatically that it has substantial parallel efforts under way to introduce a next-generation platform, and that our concern about a delay of two years or more is overly bearish."
On the switching side, Daubenspeck notes he's been "waiting for a big upgrade," adding that rumors say Cisco's Catalyst successor could arrive in 2008.
Giancarlo at least acknowledged a new switch during the earnings call: "We will be introducing some new platforms in the near future. We expect those platforms to actually expand our market somewhat in new areas that today are not well served by switches, but we also expect the normal upgrade and product evolution that we tend to have in our product line."
It's not as glamorous as TelePresence or WiFi-enabled baseball parks. (See Cisco Dials Up Videoconferencing and Cisco Field Update.) But switching remains a Cisco staple, representing 35.7 percent of revenues for fiscal 2007, which ended in July.
Switching is enjoying growth from a surge in enterprise spending, but it's also driven by "the demand by service providers to go more into Ethernet, in particular, both in their central offices as well as in their access networks," Giancarlo said.
— Craig Matsumoto, West Coast Editor, Light Reading