Volpi Downplays Cisco Concerns
In a breakout session at the UBS Warburg investor conference held here in New York today, Mike Volpi, chief strategy officer for Cisco Systems Inc. (Nasdaq: CSCO) fielded questions from investors about Cisco's high inventories in its latest quarterly earnings report and increased competition from Juniper Networks Inc. (Nasdaq: JNPR) in the core router market (see Cisco: Boom or Bust? ).
Volpi attributed the high inventory rates to the industry-wide component shortage. Plagued by long lead times for products in the optical sector, he said, the company double ordered components to try and keep up with customer demand. The ONS 15454 metro-area network aggregation product it acquired from Cerent has been reportedly having problems (see Cisco's Optical Customers Face Delays). But other optical products, including the 1500 dense wavelength-division multiplexer for the metro area, has also been affected, according to Volpi. “Our lead times have exceeded what we would like to see for certain product categories. We’d like to see them get down to three or four weeks or less. Right now we aren’t even close.”
In terms of optical products, Volpi says that optical interface components and high-speed ASICs are the two component types giving them the most trouble. While they expect the optical interface component shortage to sort itself out within the next quarter, the ASIC problem could take a bit more time.
“Every time there is new packaging of ASICs it takes the manufacturers six to nine months to get it to us. Two years ago we didn’t have this problem as much, because we didn’t need the world’s most complex ASICs. We’re going though a learning curve, and our suppliers are going through the learning curve, too.”
Volpi said that Cisco is trying to find other suppliers to augment the single supplier that they are using now, but that too will take time.
“The foundry we are working with has improved production but not enough to our liking,” he says. “We are calling around to the other vendors in this space, and they say they can do it, but it takes time. Our objective is to bring them up to speed, but it will take six to nine months.”
Volpi also addressed questions regarding Juniper’s jump in market share in the core router market over the past few quarters.
“We lost some market share when we weren’t performing,” said Volpi. “But the way this market works is that these providers are looking for the best technology, and I think we have a chance to get some of that market share back.”
In particular, Volpi focused on the fact that Cisco would be introducing its own OC192 (10 Gbit/s) interface cards for the core GSR platform in December, with general availability in January.
“We are seeing a lot of interest from customers,” he said. “And they are giving us reason to think that we have a technology edge over Juniper.”
When asked about comments that Mike O’Dell, senior vice president and chief scientist at Uunet, made in a Business Week article regarding his disappointment in Cisco’s core routing platform, Volpi fired back:
“Don’t forget that Uunet is an investor [in Juniper], so I would take those comments with a grain of salt. Besides, Uunet is one of those customers who has expressed interest in our OC192 line cards. If they weren’t interested in our product, I don’t think they’d be calling us.”
-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com