Bindusagar,
Joe Bellace makes a major misassumption about Cisco's carrier business. While Cisco does derive about 30% of its revenues through carriers, more than half of that revenue is office equipment which is subsequently sold through to enterprises. Another 2-3% is office equipment bought by carriers for their own internal employee data networks. About 10% of total revenues is actually carrier-class equipment, sold to carriers and deployed in public carrier networks. While you say it is a 30-40% play, it is actually a 10-15% play.
Another way to look at it, who are Cisco's carrier customers? Admittedly, Cisco has 87% share of ISP router sales, which account for more than half of their carrier sales. In remote access, the vast majority of Cisco's sales are to the enterprise market, where they dominate. In carriers, Cisco has USWest (less than 100K ports installed) and Qwest (less than 5K) vs. Ascend with over 7 million ports installed with carriers.
Turning to ATM/frame relay, Cisco has AT&T's legacy frame relay, Sprint's legacy frame relay (contrary to popular opinion, no award for next-gen ATM has been made), BT's legacy frame relay, a portion of WorldCom international, and USWest (rumored in jeopardy). This does not rate next to Ascend's customer base (or even NN's).
Cisco is a dominant enterprise networking company trying to become a player in the carrier space. With its resources, I expect it become much more of a force in the future - but it is well behind Ascend today.
While it is one of the great companies of our time, this is an uncertain time for Cisco. 1999 corporate IT budgets have not been finalized. Enterprise networking industry growth is expected to be less than 15%. Gaining a foothold in the carrier market is slow going. Financial institutions (18-20% of Cisco revenue) are not likely to be the growth drivers they were the past 4 years. While it will undoubtably beat first quarter numbers by a penny or two, and will probably meet expectations for January (usually a strong quarter), April will be tough.
To make the $1.46 consensus for fiscal 99, Cisco needs to top 30% annual growth and hold margins constant at 65.7%. I think that's a tall order even for a great company like Cisco. |
