Competition is getting stiff, will give CSCO tremendous margin pressure.
--------------------------------
IBM gets serious about Ethernet
Firm injecting ATMtechnology into Ethernet
gear.
By MARC SONGINI
Network World, 02/08/99
RESEARCH TRIANGLE PARK, N.C. - IBM is
ready to unleash a line of high-speed Ethernet
switches that will boast quality-of-service (QoS)
capabilities typically found only in ATM gear.
Big Blue is also adding directory-based policy
management technology to its router and switch lines,
making it easier for companies to prioritize access to
net re-sources.
The moves are designed to make IBM a more
significant player in the Ethernet market. Until now,
IBM has focused largely on Token-Ring and ATM
switching technologies.
"We expect to grow our Ethernet business at three
times the industry rate this year," said Rob Zimmer,
director of strategy for IBM's Networking Hardware
Division at the recent ComNet/DC '99 conference in
Washington, D.C. "We feel that only Lucent has
anywhere near the capability to offer end-to-end
products and policy control that we will have."
IBM executives said the company over the next 10
months will unleash a family of Ethernet and Gigabit
Ethernet campus and backbone switches built with the
firm's Prizma ATM chip and other IBM Application
Specific Integrated Circuit (ASIC) technology. The
moves will let users build big high-speed Ethernet
backbones with ATM QoS capabilities.
Prizma, developed in IBM's Zurich Research Lab, is
a 28G bit/sec ATM chip at the heart of the company's
ATM switches. IBM would not say how many boxes
will make up the new family.
In addition, IBM will add policy-based management
features to the software running on all of its major
switch products - including the 2212 router, 827X
switch/router families and 8265 ATM switch.
To help enable policy-based management, IBM will
add Lightweight Directory Access Protocol (LDAP)
support across its line of net gear. This will let IBM
switches access user profiles and implement QoS
policies from any LDAP directory in an enterprise
network.
With these initiatives, IBM joins Cisco, 3Com and
other communications bigwigs that offer policy
management for their routers and switches. To
differentiate its products from those of competitors,
IBM plans to use the high-throughput capacity of its
Prizma chip in combination with QoS features, such
as guaranteed bandwidth, best-effort delivery and
priority queuing.
IBM certainly has a lot to prove in the Ethernet arena,
but some analysts were cautiously optimistic about the
company's chances.
The policy management initiative will let IBM sell to its
installed base of Token-Ring users migrating to
Ethernet, and also could be attractive to non-IBM
customers, says Sam Alunni, president of Sterling
Research, a consultancy in Sterling, Mass.
IBM believes it can make highly competitive Ethernet
products, but in the past, the company didn't feel the
need to offer an alternative to its Token-Ring line.
-----------------------------
Now look at these numbers:
quote.yahoo.com
quote.yahoo.com
CSCO mkt cap about the same as IBM. BUT, IBM is way way bigger than CSCO and IBM PE is only about 30 compared to 120 for CSCO. IBM has plenty of room to adjust their price points to drive prices down and what'll happen when the margins drop for csco. This is the typical play when mkt gets to a sizable point and with certain maturity. Imagine, CSCO has to play at the PE of 27 similar to IBM because margins drop. That will be like CSCO share price of about 35$. Compare IBM to CSCO, IBM at this point based on valuation and earnings PE ratio is a much better risk. imo. |
