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Has Huawei Got Cisco's Number?

Light Reading
News Analysis
Light Reading
6/12/2002
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Who’s Cisco Systems Inc.'s (Nasdaq: CSCO) scariest competitor right now? It's probably not Juniper Networks Inc. (Nasdaq: JNPR), Nortel Networks Corp. (NYSE/Toronto: NT), Lucent Technologies Inc. (NYSE: LU), or even Alcatel SA (NYSE: ALA; Paris: CGEP:PA).

Instead, try FutureWei.

FutureWei is the new North American communications equipment subsidiary of Chinese telecom equipment giant Huawei Technologies Co. Ltd. The company officially launched last week with a splashy booth at the Supercomm 2002 tradeshow, staffing it up with a gaggle of lithe, silver-spandex-clad models hired to hand out product literature and generate buzz.

By most accounts, it worked. Several sources have since mentioned FutureWei’s grand entrance as one of the spectacles of the industry.

“They had a big booth, they had a lot of traffic, and there was a lot of activity going on in that booth,” says Gabriel Lowy, an analyst with Crédit Lyonnais Securities Inc. who visited with FutureWei at Supercomm. “Their goal is to establish a footprint in this market.”

“Yeah, they're the ones that sell you a router for something like $600,” notes Lewis Eatherton, the former CTO of [email protected] who now works as an independent consultant.

“They’re Cisco’s biggest fear, even though Cisco won’t admit it,” says another Wall Street analyst, asking to remain anonymous.

Huawei, FutureWei’s parent, is a telecom equipment Goliath in mainland China that has long frustrated would-be competitors in the Asian markets by producing low-cost routing, switching, and optical gear. It has more than US$3 billion in revenue and is backed by the Chinese government. With FutureWei, it’s now building a significant presence on this side of the Pacific. FutureWei has a U.S. headquarters in Texas and an office in San Jose, Calif.

It’s enough to give many North American players the chills, even if they aren’t saying so publicly.

Here’s why: FutureWei has mimicked Cisco's marketing in its North American push by offering very similar products in several categories. Here’s an example of how FutureWei matches Cisco’s offerings. Take FutureWei’s Quidway 2620 line, a lineup of low-end switch/routers for branch offices. This product matches the feature mix of Cisco’s 2600 series (which, coincidentally, includes a 2620).

Shopping for a larger enterprise switch/router? Well, Cisco has its 3600 line, including the popular 3640. Conveniently enough, FutureWei carries the Quidway 3640, which addresses the same market. Need something in the Internet core? Cisco has the 12000 series core routers, and FutureWei has its NetEngine IP Core Routers.

Though neither company publishes the prices of these products, industry sources say that FutureWei competes primarily on cost, and that its products are almost always significantly cheaper than those of its North American counterparts.

“They could probably build anything in eight months and then offer it at 40 percent of the price,” says Eatherton.

Not only has FutureWei nearly duplicated Cisco’s portfolio of routers, it’s working on a series of metropolitan optical switches that appear to match Nortel’s metro optical switch offerings -- and also have the same naming convention.

For example, Nortel has the OPTera Metro 3000, which, in the company’s marketing language, “offers an ultra-compact OC3 platform that delivers the advantages of the OPTera Metro 3000 Multiservice Platform series to customer-premises environments that require only minimal bandwidth.”

And FutureWei has the OptiX Metro 3600 and 3100, which are marketed as “10G/2.5G level MSPP [multiservice provisioning platform] units for large capacity broadband MANs at edge layers.”

Some industry sources have alleged that FutureWei is reverse-engineering both Cisco and Nortel products. One source, asking to remain unidentified, claims that Cisco is considering a lawsuit against the company, now that it’s set up shop on Cisco’s home turf.

Cisco officials say there is no legal activity and that they have a healthy respect for Huawei and its new America subsidiary, FutureWei.

“They are a competitor and we have a healthy respect for them, as we do all competitors,” insists a Cisco spokeswoman. “We have no litigation against this company.”

FutureWei did not return phone calls requesting comment.

Is Huawei playing fair? By official count, so far, yes. There's no litigation in train. And some experts say that even if FutureWei is able to market products that match Cisco's hardware, the products are still distinct on the software side.



One technical expert, speaking on background, says that there has long been talk off Huawei “knocking off” Cisco products but that charges of intellectual property theft may be overwrought. Cisco, he notes, can differentiate its product based on software, performance, and maintenance features even if Huawei can duplicate the hardware.

"A Huawei router may look like a Cisco router, but it doesn't perform like one,” says the routing expert. “High-end routing is still not anywhere near being a commodity. Huawei doesn't have the engineering experience and expertise to design good software. Cisco's been designing software since 1984.”

At any rate, some experts think it would be smarter for Cisco to partner with FutureWei, rather than pick a fight.

"If these guys align themselves with the right players, they're going to make an impact," says Crédit Lyonnais's Lowy of FutureWei.

One thing's for sure: FutureWei and parent Huawei are serious about their new push into North America. In a recent article in the South China Post, Huawei executive vice president William Xu said: "As we compete alongside the top players in the international arena, this will take us to the next level of becoming a truly global player."

— R. Scott Raynovich, US Editor, Light Reading, with additional reporting by Margaret Reardon, Senior Editor, http://www.lightreading.com

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Peter Heywood
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Peter Heywood,
User Rank: Light Beer
12/5/2012 | 2:16:09 AM
re: Has Huawei Got Cisco's Number?
I think this stuff about Huawei being somehow connected with the Chinese military and Huawei having built a fiber network for the Iraqi military is complete cock and bull.

Do you have any evidence that would substantiate what you're saying?
dodo
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dodo,
User Rank: Light Beer
12/5/2012 | 2:16:04 AM
re: Has Huawei Got Cisco's Number?
http://pub5.ezboard.com/fyourd...

Peter

There was a lot of discussion on this subject last fall between GEA and some other folks ( re: article on Huawei on the Hunt).

The above URL may shed some light
optical_man
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optical_man,
User Rank: Light Beer
12/5/2012 | 2:16:02 AM
re: Has Huawei Got Cisco's Number?
Peter,
Come on, it's out there. Huawei was in both Afghanistan AND Iraq before 9/11.

"According to press reports dating back to February and March 2001, Huawei Technologies acted in violation of UN sanctions in constructing a fiber optic air defense network for Iraq around Baghdad. For example, according to a Washington Post article of 1 March 2001, the company was the subject of an official U.S. inquiry to China regarding the extent to which Huawei helped Iraq "improve links between antiaircraft missiles and the radar systems that guide them." This militarily-relevant construction project with a regime that has repeatedly sought to shoot down U.S. pilots patrolling the No-Fly-Zone ultimately led to U.S. and British bombing sorties on February 16, 2001 intended to disrupt or destroy the network built by Huawei. "

http://www.centerforsecuritypo...


Now, going forward, Huawei is currenlty building new networks in Iraq and Afghanistan.
This article is pretty troublesome for all of us in the West. Not of because of the Iraq/Afghanistan part, but because they're winning all the deals!

http://www.ocnus.net/artman/pu...



gumbydammit
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gumbydammit,
User Rank: Light Beer
12/4/2012 | 10:16:34 PM
re: Has Huawei Got Cisco's Number?

Instead of cultivating innovation and engineering, we get mimic (reverse engineering), reproduce, and sell dirt cheap.

Good luck on the technical support guys! I guess if it *mimics* Cisco so well, just call the CSCO TAC line.

I'm kinda suprised they hadn't done this before. Chase where all the $$ is, thats actually a *capitalistic* thought, isn't it?

/gd.
burrtd
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burrtd,
User Rank: Light Beer
12/4/2012 | 10:16:34 PM
re: Has Huawei Got Cisco's Number?
If they build their routers like they take care of
their planes, there is nothing to worry about. The reason the CI is such a dangerous airline to fly is because it is a polictical pawn. This will also be the case for Huawei.
dietaryfiber
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dietaryfiber,
User Rank: Light Beer
12/4/2012 | 10:16:33 PM
re: Has Huawei Got Cisco's Number?

rj,

This is one you may not want to compete with. Huawei receives signficant (several Billion of Dollars) subsidies by the Chinese government. On top of that low cost (some rumored to be at 0 cost - read slave) labor is used to build the products.

dietary fiber
dbostan
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dbostan,
User Rank: Light Beer
12/4/2012 | 10:16:33 PM
re: Has Huawei Got Cisco's Number?
What is more worrisome is the fact that they are buying the assets of some start ups, who did not get (enough) money to continue operations in the U.S.A., but had complete products (some in trials with established carriers), for pennies.
Some of those start-ups were quite innovative and their products better than similar products from established players in the equipment industry. If you add the (very) low prices to innovative technology, acquired LEGALLY, not even reversed engineered, the established players should be really worried.
bitsarebits
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bitsarebits,
User Rank: Light Beer
12/4/2012 | 10:16:33 PM
re: Has Huawei Got Cisco's Number?
I will second on this articles.

A lots of people underestimate the progress of
Chinese telecom industry. Just think about,
China has 155 million cell phone subscriber and
it is adding 70 million new subscribers yearly.

To support that many subscribers (plus, it has second largest internet user already), the country
had deployed lots of gears, if you think most of
those gears are imported, that was definitely true 10 years ago, 5 years ago, even, 3 years ago, not any more. Today, most of telecom/networking gears deployed in China are homemade. They are cheap, maybe not as high quality as Cicso gear, but, it will catch up.

Chinese telecom/networking gears will start to spread around world just like Japanese cars spread around world in 60s or 70s.
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/4/2012 | 10:16:33 PM
re: Has Huawei Got Cisco's Number?
This is one you may not want to compete with. Huawei receives signficant (several Billion of Dollars) subsidies by the Chinese government. On top of that low cost (some rumored to be at 0 cost - read slave) labor is used to build the products.
_________________

Call me an idealist but I believe an honest person getting paid an honest wage to perform an honest job will out produce a slave any day of the week. This production will win in an economic battle.
light-headed
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light-headed,
User Rank: Light Beer
12/4/2012 | 10:16:33 PM
re: Has Huawei Got Cisco's Number?
does anyone know if their CLI actually matches IOS?

maybe they could reverse-engineer IOS and fix all those bugs and flaws... ;-)
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