Cisco Markup Redux

5:40 PM -- Vyatta Inc. loves to take digs at Cisco Systems Inc. (Nasdaq: CSCO), and why not? When you're a little open-source company with about one one-billionth of Cisco's market share, you don't have to pull your punches.

To that end, Vyatta claims it's making inroads into the carrier space -- Tier 2 and 3 providers, specifically -- and that the reason is Cisco's pricing. Specifically, memory upgrades under Cisco's markup can run in the thousands of dollars, says Dave Roberts, Vyatta's VP of marketing. (He's saying $5,000, a figure I haven't verified with Cisco.)

By contrast, an entire Vyatta router -- which consists of a store-bought PC with Vyatta's free software on it -- can cost less than the Cisco upgrade.

Cisco's markups are no particular surprise, and we've previously pointed out how this affects things on the optics side. (See Cisco's Secret Franchise.) The practice is helping fuel some choice Vyatta trash-talking, though. "If oil companies had margins as big as Cisco's there would be congressional hearings," Roberts says.

— Craig Matsumoto, West Coast Editor, Light Reading

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btierney 12/5/2012 | 2:59:17 PM
re: Cisco Markup Redux Sounds like a comment from Dennis Kucinich.

Any UFO's in Belmont, CA Dave

Pete Baldwin 12/5/2012 | 2:59:16 PM
re: Cisco Markup Redux I don't know... oil company margins are in the 20s and 30s, aren't they? And people get upset about that.

Cisco and its ilk are in the 60s. Microsoft's gross margin is something like 80% -- but then again, everyone's mad at them all the time.
btierney 12/5/2012 | 2:59:15 PM
re: Cisco Markup Redux craig,

hard to lump Cisco and Microsoft in the same boat. Cisco does a good job of promoting open standards. Microsoft is all about closed and proprietary...

Nothing wrong with Cisco innovating on top of open interfaces
Pete Baldwin 12/5/2012 | 2:59:15 PM
re: Cisco Markup Redux I actually wasn't trying to lump Cisco and MS together, but since we're on the subject ...

Cisco does follow open standards. But the folks attending IEEE meetings will tell you Cisco tries hard to make sure those standards conform to whatever Cisco was already doing.

Not quite the same as what Microsoft does -- but there's a lot more similarity there than many believe.

Separately there's Apple, which is 10X worse in the "mine mine all mine" category.
Road Trip 12/5/2012 | 2:59:14 PM
re: Cisco Markup Redux You know what you call guys who say something like this? Losers.
trzwuip 12/5/2012 | 2:59:13 PM
re: Cisco Markup Redux These are the same kind of customers that think Astericks provides a "carrier grade" solution! Fact is that a PC is NEVER the same reliability as Carrier Grade equipment!

Fact is Cisco does not sell just boxes anyway, they sell "solutions" for carriers & enterprise. Cisco is rarely "best of breed," but instead they best at what they do... Solutions...
sjd6 12/5/2012 | 2:59:12 PM
re: Cisco Markup Redux I think cisco has the nastiest markups of any networking company by far, partially from experience, partially from articles like this. So I say let's hear more. Vyatta keep them coming!
everythingip 12/5/2012 | 2:59:12 PM
re: Cisco Markup Redux obviously you haven't really checked out other networking vendors
-0 12/5/2012 | 2:59:07 PM
re: Cisco Markup Redux > But the folks attending IEEE meetings will
> tell you Cisco tries hard to make sure those
> standards conform to whatever Cisco was already
> doing.

My observation is that only those who have nothing to say don't do that.

What exactly do you mean by this statement??? If you are not going to influence standards then what's the point in participating in all those meetings? You will be much better off waiting until standard is ratified and then receiving it for nominal-to-no price.
One drawback though. At this point you are in the crowd and have to adjust your margins accordingly.

Speaking of margins. If you charge high margins and people still bye from you it means one of two things - either you are monopolist and people simply have no choice but obey your rip off or you are doing something others can't offer (at least not now). And here is the fundamental difference between PC software and many other markets. Microsoft is monopolist and charges premium for that. Network gear companies like Juniper, Cisco offer you products which are not commodity but they do have competition. They charge you premium for the fact that they can get idea, go to IEEE/IETF/etc to push it as standard and implement it before Huawei. And then there is Huawei which is just good implementator of somebody else's idea and which makes sure that authors of ideas do not earn money for eternity and have to innovate constantly. And then there is Vyatta which produces system with 0 innovation and appropriate cost.
There is no point comparing margins of Cisco vs Huawei vs Vyatta. They are all important and have their niche. That's why I regard this market as healthy.
Market of PC OSes misses companies like Huawei. And this is what allows Microsoft to charge outrageous premiums; not innovations which MS is supposedly doing from time to time.
sjd6 12/5/2012 | 2:59:06 PM
re: Cisco Markup Redux Only cisco can put their name on a pile of dog crap and people still buy it.
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