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Optical components

Poll: Cisco's Overdoing It

While the topic is generating its share of controversy, most Light Reading readers don't seem to think the Cisco Systems Inc. (Nasdaq: CSCO) practice of reselling optical interfaces is unreasonable.

We're talking about the concept, not the price. In the current LR poll, 39 percent of more than 600 respondents say Cisco's methods are OK but could be toned down a bit. Another 32 percent flat-out say, "Good for Cisco!"

At question is Cisco's practice of charging reportedly huge markups on optical modules for its routers. The modules are based on standards, but beginning in 2003, Cisco software began rejecting modules bought from other vendors. So, users have to buy Cisco's modules -- and pay a premium as well.

The practice came under scrutiny this week as Andrew Schmitt of Nyquist Capital issued a report saying modules make up a bigger share of Cisco's profits than previously believed. (See Cisco's Secret Franchise.)

Cisco's module markups have some users steamed, but only 22 percent of the poll respondents thought the process should be illegal, while another 7 percent said they don't care. (Why take the poll, then?)

Responses were split on whether the practice is good for Cisco's investors. Forty-seven percent said they'd cheer Cisco, were they investors, while another 44 percent said they'd be worried -- after all, there's a chance Cisco's profits might be padded by its optics sales.

What's a user to do? One possibility is to start buying up cheaper knock-off optics, clones rigged to pass Cisco's procedures. Most respondents -- 68 percent -- said they'd do this; the other 32 percent said no, apparently put off by the possibility of faulty or underperforming modules.

There's still time to make your voice heard: Take the poll here.

— Craig Matsumoto, Senior Editor, Light Reading

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