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Cisco Takes a Dip

Light Reading
News Analysis
Light Reading
8/22/2000

Cisco Systems Inc. (Nasdaq: CSCO) is losing ground in its fight to hold onto the IP core routing market, according to preliminary second-quarter market share numbers from The Dell’Oro Group.

After owning about 80 percent market share for the past year, Dell’Oro reports that Cisco lost six percentage points, slipping to 74 percent market share, in Q2. Who's picking up the slack? Juniper Networks Inc. (Nasdaq: JNPR), which increased its market share from 17.3 percent last quarter to 23.6 percent this quarter.

Not only has Cisco slipped in market share, but its quarterly growth didn’t keep pace with the industry as a whole. The market grew at 29 percent, while Cisco only grew 19 percent, according to Dell’Oro. Juniper, on the other hand, showed phenomenal growth -- outpacing the industry with 77 percent quarterly growth (see Juniper's Revenues Rocket).

Next quarter doesn’t look much better for the routing giant. Cisco CEO John Chambers mentioned on the company’s last quarterly conference call that second-quarter bookings for its GSR core routing product grew only 10 percent while bookings the previous quarter had grown 60 percent. This means that already Cisco could be down in the revenue count for the third quarter 2000 when those sales are realized as revenue (see Cisco Beats Street, Cries 'Optical' ).

The numbers also show that Juniper isn’t only beating Cisco out of accounts where they’re shipping OC192 interfaces, an interface that Cisco won’t have ready until early next year. Juniper was first to offer OC192 commercially, but sales of those interfaces barely register on the Dell’Oro market stats for the second quarter.

Who else is in the race? Running a very distant third is Avici Systems Inc. (Nasdaq: AVCI), which had a stunning showing its first day trading on the Nasdaq a few weeks ago (see Avici and Corvis Make Stunning Debuts). But the company can’t claim the remaining 2.4 percent of the market completely for itself. It’s sharing the leftover sliver with Lucent Technologies Inc. (NYSE: LU), Nortel Networks Corp. (NYSE/TSE: NT), and a handful of unidentified “others." Clearly, Cisco’s biggest immediate threat is not the pack of vendors creeping up on the lower end of the spectrum, but the big dog chomping at its heels.

Cisco says that the Dell'Oro numbers are not consistent with the numbers they have and that they are working with analysts at the Dell'Oro group to figure out the discrepancies.

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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