Cisco feels the competitive heat
By Jeff Pelline
Staff Writer, CNET News.com
March 10, 1999, 4:45 a.m. PT
Cisco said it expects that gross margins will continue to decrease, due to increased
competition and a booming market for lower-end products, according to a regulatory filing.
The networking giant's remarks were contained in a quarterly "10Q" filing with the Securities
and Exchange Commission.
"The company expects that gross margins will continue to decrease in the future, because it
believes that the market for lower-margin remote access and switching products for small- and
medium-sized businesses will continue to increase at a faster rate than the market for the
company's higher-end products," the filing said.
In addition, Cisco said it faces increased competition from "large telecommunications
equipment suppliers and well-funded startup companies."
The booming market for lower-end products and increased competition from telco equipment
giants is part of an industry-wide trend, partly brought on by the convergence of voice, video
and data. Analysts have said this could put pressure on the stocks of highflying networking
companies.
Cisco also said "for the near future" that
research-and-development expenses are expected to increase
at a greater rate than the sales growth rate as the company
invests in technologies for new market opportunities.
The company said it is trying to counter the pressure on gross
margins by controlling royalty costs and improving
manufacturing efficiencies, among other measures. |
