Optical/IP Networks

State of Cisco

9:15 AM The death of '12% to 17%' and what to do about Huawei

Pete Baldwin 12/5/2012 | 4:53:41 PM
re: State of Cisco

One thing about the gross margins ... Cisco does expect its "more-aggressive-in-China" stance to affect router gross margins.

On the pie chart that we show for just a few moments, a "+" indicates a product area with higher-than-average gross margins, and a "-" is lower-than-average. And if you look carefully, you'll see that routers go from being "+" in 2011 to "-" in 2014.

There are a couple of ways you could take this. Mark Sue of RBC writes that "the worst may be over" for Cisco in gross margins, because the company is setting 60% as a lower limit (compared with something like 61.7% estimated for FY'12). But George Notter of Jefferies writes "the company is bracing for even more margin pressure."

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