Cisco Systems to Ship Gigabit Ethernet Technology in 2nd Qtr
San Jose, California, Jan. 2 (Bloomberg) -- Cisco Systems
Inc. said it will ship the first versions of its newest switching
technology in the second quarter of 1998, entering a market for
the sophisticated networking equipment already introduced by
several rivals.
Cisco expects customers to begin using the so-called gigabit
Ethernet technology in computer networks by the second half. The
technology allows the transfer of data across small computer
networks up to ten times faster than existing technology.
Industry analysts have been waiting for Cisco, the world's
No. 1 networking company, to provide a timeline for its version
of the new technology, which is expected to generate sales of $1
billion by 2000. The company's strategy differs from that of its
competitors 3Com Corp. and Bay Networks Inc., who began shipping
versions of gigabit Ethernet last month, before a standard was
established and ahead of widespread demand for the technology.
''Cisco's strategy is to have the products ready when the
customers want them,'' said Noel Lindsay, an analyst at Deutsche
Morgan Grenfell, who maintains a ''buy'' rating on the company's
stock.
Waiting for a Standard
Analysts said they don't expect there to be a significant
market for gigabit Ethernet until late 1998 or 1999, and Cisco's
strategy has been to wait for a technological standard to be
adopted. A standard is expected to be ratified in March by the
Institute of Electrical and Electronics Engineers, the most
widely accepted standards group for networking-equipment makers.
Scott Heritage, an analyst at UBS Securities who also
maintains a ''buy'' rating on Cisco stock, said that although
''on the surface'' it appears the company is behind its rivals in
introducing the new technology, ''very few customers are going to
need (gigabit Ethernet) capability by the end of 1998, so Cisco
is not really late,'' he said.
The company said it will introduce the technology, expected
to make up an estimated 5 percent of the networking market by
2000, as part of an overall solution to speed up so-called local
area networks, or LANs, which are found mostly on college
campuses and in large corporations.
''We don't want to just ship a new box. We want to make sure
our (gigabit Ethernet) products work as a system,'' said Jayshree
Ullal, vice president of marketing for Cisco's enterprise
business unit.
Plug-in Modules
Ullal said in an interview that the technology will appear
first in plug-in modules compatible with two of the company's
current product lines, Catalyst 5000-series switches and Cisco
7000-series routers. The modules will process data at speeds of
as much as 8 million packets per second, slower than products
introduced by rivals.
Ullal said that rather than being built for sheer speed,
Cisco products will let customers upgrade their networks to
gigabit speeds while maintaining the ability to communicate with
networks using older communication technologies.
''Cisco's approach makes the most sense,'' analyst Lindsay
said. ''You have to support the range of (communication)
protocols that are still being used.''
The gigabit Ethernet technology Cisco will use in its new
products was developed in-house, Ullal said, but will be combined
with so-called layer-3 switching technology Cisco acquired when
it bought startup Granite Systems in 1996. That technology is
needed to process data moving at gigabit speeds.
Ullal said she wouldn't rule out the possibility that San
Jose, California-based Cisco might acquire another company
developing gigabit Ethernet technology to round out its product
lines.
''But right now, as far as our customers are concerned, we
feel we are on the money with our own gigabit technology,'' she
said.
Cisco shares rose 1 3/8 to 57 1/8 in late trading.
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