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Optical/IP

Cisco's WLAN Weakness?

Wireless LAN didn't grow as fast as other "advanced technologies" in Cisco Systems Inc.'s (Nasdaq: CSCO) lucky grab bag during its second quarter, according to an analyst note from Merrill Lynch & Co. Inc.

The note adds weight to suggestions that Cisco plotted its $450 million move on wireless LAN switch startup Airespace Inc. to head off any future weakness in its standalone access point business at the pass (see Cisco Spirals AP Market and Cisco Buys Airespace).

In the note, Merrill analyst Tal Liani notes that such technologies as storage, wireless, and VOIP now represent 19 percent of Cisco's revenues, only 3 percent less than its router sales (see Cisco Holds Steady in Q2): "Cisco’s advanced technologies grew nearly $200 million sequentially, which is more than twice the best sequential growth achieved organically in any previous quarter. The growth was well balanced with all but wireless technologies achieving robust double digit growth."

Cisco is still a comfortable number one in the enterprise wireless LAN market, but the prices of its Aironet standalone access point products are under pressure. The latest Unstrung Insider 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.

Liani reckons that once Cisco integrates the mid-range Airespace product line into its portfolio the firm should once again see stronger sales: "We believe that wireless technologies will grow rapidly once Cisco completes its Airespace acquisition."

— Dan Jones, Site Editor, Unstrung

freetoair 12/5/2012 | 3:26:49 AM
re: Cisco's WLAN Weakness? Got a chuckle out of this article:

http://yahoo.businessweek.com/...

The result: In January, Cisco agreed to pay $450 million for Airespace, which was on track to do $85 million in sales in 2005, say insiders. That prompted groans from some investors who believe that Cisco should be getting more of an edge from the $3 billion it spends on research and development. "It's kind of pathetic," says a portfolio manager at one of the company's largest shareholders. "It seems like something is broken at Cisco."

I know the Cisco folks are forbidden from participating in message boards like this one but I am surprised no one else (although this board is generally sleepy) has also regonized the pathetic state of Cisco R&D?

free_radio 12/5/2012 | 3:26:48 AM
re: Cisco's WLAN Weakness? just re-read my opinion before, sorry for the typo with regard to HP and the mixed-up with Xerox. They're a completely 2 different company.
free_radio 12/5/2012 | 3:26:48 AM
re: Cisco's WLAN Weakness? don't mean to take side on Cisco but that's what happened usually at big large 800-pounds gorilla companies.

Did you do any research on Microsoft, the most profitable software company in the world, with regard to what's their R&D spending? How can they get loose the spark on Google, security virus, etc. To Rick Rashid (Microsoft Research VP): i think you should intensify the efforts since the accomplishments from you that I'm aware of is when you're at CMU for the micro-kernel OS.

And how about Intel? Plus HP which has invented Palo Alto Xerox but still struggling now with Carly' ousted CEO and its PC/printer business ....

Kudos to Airespace, they have executed the wireless switch successfully unlike others ie. Trapeze, Aruba, Meru, Vivato ... Other start-up companies should learn from them and apply it to the next business venture.

It's all about EXECUTION, my fellow friends at inspiring start-up companies. Not about R&D spending ... use your Godspeed to achieve the laser-like focus.
freetoair 12/5/2012 | 3:26:47 AM
re: Cisco's WLAN Weakness? Yes that is my point exactly - it has happened to them - quite a long time ago in my observation. Yet most people are or do not want to recognize it. All down from here. The reasons for the apparent improvement this quarter, and most of the last 12-18, in the financials was/is all about cost cutting/reduction. Not new markets, growth, etc. Pressure on the router business is hurting.

Country club atomsphere where everyone's main job is managing up not actualling doing anything innovative. If you listemd to the earnings call Chambers almost did not know who "airespace was" when the question came up. He clearly was confused for a moment. Interesting sign.
free_radio 12/5/2012 | 3:26:45 AM
re: Cisco's WLAN Weakness? I always think Cisco as the clever, strategic sales & marketing company with all their profits revolves around router box all over installed in the enterprises.

think of Router as their trojan horses with security, wireless, voice over IP, and others are the armies inside it. Just like Microsoft with the Windows OS or Intel with its Pentium/Centrino processors. Maybe HP should be aware of its advantage in the printer business - too bad Carly was there for 6 years.

In my eyes, R&D innovation is completely different than start-ups intention. R&D is pure research, just like IBM Research, HP Research - they look far away 10 years ahead ie. use biology for "future" transistor instead of within 2-3 years time of window.

Start-up companies are always about EXECUTION, not about innovation or research. They just have to move fast just like Godspeed.

Cisco is clever, they're using start-ups as their mercenary armies to open up new markets and grabbed the best one (well, in their view at least since it's their money) to be integrated into Cisco culture.

Not like Intel and Microsoft, where most of the start-ups acquired were basically crushed to end. :-)
freetoair 12/5/2012 | 3:26:40 AM
re: Cisco's WLAN Weakness? I am hard pressed to name an aquisition that was a success at least going back to pre-Stratacom. Ask those folks about being crushed internally (albeit they made a ton of $$). Where did Clarity, Jetcell and others go on the wireless front? Many other examples.
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