re: Cisco's Q3: Ouch!Everyday more Internet Traffic is passing through the systems of Juniper Networks and other companies equipment. Are you Ready for the shifting winds of technology?
re: Cisco's Q3: Ouch!Chambers blamed the macro-economy. It was only half true, he forgot to mention his company is losing market share left and right...
re: Cisco's Q3: Ouch!The fact that management made a $2.2bn inventory mistake (coupled with the 2 hour earnings call) shows that management is comprised of marketeers (read mouseketeers) and not manufacturing / process control experts.
It is time for them to run the company in a responsible manner by compacting the supply chain in order to avoid future boom/bust cycles. Toyota does it, why can't Cisco?
"It is time for them to run the company in a responsible manner by compacting the supply chain in order to avoid future boom/bust cycles. Toyota does it, why can't Cisco?"
Predicting for demand that can increase/decrease varies by 10% per year is fundamentally different than predicting demand that varies by more than 100% up or 50% down. When there is huge potential upside, you have to make big bets that you can succeed, or you will definitely fail.
There is an excellent Harvard Business School case study which shows exactly how this happens. When you have rapid changes in end-user demand, and you do not sell directly to the end-user, the oscillations get amplified at each step along the supply chain.
To illustrate:
* Analysts predict big demand for high-bandwidth services. "Build it and they will come." * Lots of service providers pop up to fill this demand. Investors pour money into these service providers. Not everyone will live as a business, but they will all start by buying equipment to get into the game. * Cisco/Nortel/<pick favorite="" vendor="" you=""> sees a huge increase in demand for their product. They make big bets that this demand could continue, and that they will win a good portion of it. Of course, Juniper/Ciena/ <pick 2nd="" favorite="" here="" vendor="" your=""> also make the same bet, with the predictable result that there is too much supply (say 2x too much). * Components folks see this explosive growth from <cisco, juniper="">, <ciena, nortel=""> so they all make big bets that the market will continue to grow and that they will win a good portion of it. At this point, you have components companies delivering about 4x what the market will really want, when it starts slowing down.
The market slows down (there was not quite as much demand as the analysts thought), and the casualty list starts building quickly. The companies that win market share <juniper,<br>Ciena> do not see this slowdown as quickly, because they are eating into someone else's market share. But if the market has fundamentally slowed, it is just a matter of time.
re: Cisco's Q3: Ouch! That test was on one specific product and market segment. Cisco's breadth of products (and consequently market exposure) makes it difficult to directly compare their overall results with that of juniper which (still) is mostly selling one basic product (the M40) in five different forms (M5-M160).
If you dig into the results of both companies, your going to find that there is still considerable demand in some product segements, but that in others spending has evaporated.
the systems of Juniper Networks and other companies equipment. Are you Ready for
the shifting winds of technology?
It is time for them to run the company in a responsible manner by compacting the supply chain in order to avoid future boom/bust cycles. Toyota does it, why can't Cisco?
*cough*core routers*cough*
"It is time for them to run the company in a
responsible manner by compacting the supply
chain in order to avoid future boom/bust cycles.
Toyota does it, why can't Cisco?"
Predicting for demand that can increase/decrease
varies by 10% per year is fundamentally different
than predicting demand that varies by more than
100% up or 50% down. When there is huge
potential upside, you have to make big bets that
you can succeed, or you will definitely fail.
There is an excellent Harvard Business School
case study which shows exactly how this happens.
When you have rapid changes in end-user demand,
and you do not sell directly to the end-user,
the oscillations get amplified at each step
along the supply chain.
To illustrate:
* Analysts predict big demand for high-bandwidth
services. "Build it and they will come."
* Lots of service providers pop up to fill this
demand. Investors pour money into these
service providers. Not everyone will live
as a business, but they will all start by
buying equipment to get into the game.
* Cisco/Nortel/<pick favorite="" vendor="" you=""> sees
a huge increase in demand for their product.
They make big bets that this demand could
continue, and that they will win a good
portion of it. Of course, Juniper/Ciena/
<pick 2nd="" favorite="" here="" vendor="" your=""> also
make the same bet, with the predictable
result that there is too much supply (say 2x
too much).
* Components folks see this explosive growth
from <cisco, juniper="">, <ciena, nortel=""> so
they all make big bets that the market
will continue to grow and that they will
win a good portion of it. At this point,
you have components companies delivering
about 4x what the market will really want,
when it starts slowing down.
The market slows down (there was not quite
as much demand as the analysts thought), and
the casualty list starts building quickly.
The companies that win market share <juniper,<br>Ciena> do not see this slowdown as quickly,
because they are eating into someone else's
market share. But if the market has fundamentally
slowed, it is just a matter of time.
hitechguy</juniper,<br></ciena,></cisco,></pick></pick>
That test was on one specific product and market segment. Cisco's breadth of products (and consequently market exposure) makes it difficult to directly compare their overall results with that of juniper which (still) is mostly selling one basic product (the M40) in five different forms (M5-M160).
If you dig into the results of both companies, your going to find that there is still considerable demand in some product segements, but that in others spending has evaporated.