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Optical/IP

Cisco Spirals AP Market

The aggressive street pricing of Cisco Systems Inc.'s (Nasdaq: CSCO) Aironet access point product line is set to have a “devastating” effect on the standalone AP market, according to the latest edition of Unstrung Insider.

The “Enterprise Wireless LAN Price Report” notes that the vendor has been heavily discounting its Aironet AP products over the past six months in an effort to retain its position as market-share leader. Cisco dominates the global enterprise wireless LAN market with a 43 percent market share, followed by Symbol Technologies Inc. (NYSE: SBL). (See Synergy: Switches Sizzle .)

Report author Gabriel Brown states that Cisco’s new 1230 AP product, priced at $999, is available for a street price of $650; and its 1130 AP, priced at $699, is available for $450, a 35 percent discount off list price.

Such pricing has contributed to a major fall in the average market price of standalone enterprise access points. Enterprise-grade 802.11a/g access points now carry an average list price of $733, compared to $840 six months ago, with prices expected to plummet further. Street price hovers around $400 to $450.

“The effect of this on competing vendors of standalone APs is likely to be devastating,” warns Brown. “Aironet is the leading product line in the ‘smart’ AP segment, which has always sold at a premium, and if Cisco wants to drop its prices, traditional enterprise AP vendors such as 3Com, Enterasys, and Proxim are doomed to follow.”

Brown cites Proxim’s stark profit warning last December as proof of the potential damage. At one time the second-placed enterprise wireless LAN vendor, Proxim reported that its fourth-quarter revenues would fall in the range of $22 million to $24 million, compared to the $32 million to $35 million target previously provided in October 2004. The company declared that Cisco’s “unforeseen WiFi pricing action... and resulting pricing pressure” had contributed to “lower-than-expected WiFi product revenue.” (See Proxim Plummets on Q4 Cuts.)

The falling premiums on standalone APs could also help to explain part of Cisco's motivation to buy wireless LAN switch startup Airespace Inc. for a tasty $450 million (see Cisco Buys Airespace). For -- as Brown notes -- vendors peddling the centralized switch architectures are seeing less pricing pressure than vendors that offer standalone APs (see 802.11 Switches Stand Ground). — Justin Springham, Senior Editor, Europe, Unstrung

Enterprise Wireless LAN Price Report is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,350. Individual reports are available for $900.

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