Cisco, now top dog, can't rest as rivals abound
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By Duncan Martell
PALO ALTO, Calif., March 30 (Reuters) - Cisco Systems Inc.
(NASDAQ:CSCO), the biggest maker of gear that powers the Internet,
may be out in front, but it can't afford to take its foot off
the gas: competitors large and small abound.
Consider Juniper Networks Inc. of Mountain View, Calif.
Just four years old, it came out of nowhere and now has an
estimated 18 percent of the hotly contested market for
heavy-duty Internet routers -- sophisticated, brute-force
devices that route traffic across the global network.
The competition is "getting extremely vigorous," said Frank
Dzubeck of Comm Network Architects. "There are plenty of other
companies on the horizon."
Closely held, white-hot start-ups such as Avici Systems
Inc., Ironbridge Networks and Plurris Inc. are looking to
compete not just with Cisco but with each other.
Just on Tuesday, for example, Juniper (NASDAQ:JNPR) trumped
Cisco at its own game, introducing its M160 router, which can
crunch 160 billion bits of digital information a second, the
equivalent of as many as 4 million simultaneous phone calls.
That's four times faster than Juniper's prior product, the
M40, and far quicker than Cisco's fastest router. Even so,
Cisco is still king of the router hill: It has 78 percent of
the router market, having long since mopped the floor with
competitors such as 3Com Corp. and others.
BRAVE NEW WORLD
Juniper's M160 clearly shows that the company's not just a
one-trick pony and is able to push its way into the
fast-growing service provider market, comprised of Internet
service providers, cable and telephone companies. Juniper's
sales jumped to $102.6 million in 1999 from just $3.8 million
the year before.
"Juniper is winning business from Cisco right now," said
Dataquest Corp. senior analyst David Schwartz.
Even if Juniper seems to be in the catbird seat for now, it
can't afford to rest on its laurels because, Dzubeck said,
"Avici is a very aggressive competitor to Juniper, adding that
he expects the company will soon announce plans to go public.
The cornucopia of start-up competitors and larger ones such
as Lucent Technologies Inc. (NYSE:LU), which bought networking
gear-maker Ascend Communications, and Nortel Networks Corp.
(NYSE:NT), which bought Bay Networks, is indicative of the cowboy
nature of the service provider marketplace, analysts said.
This brave new world of converged voice, video and data
streaming across one network was unthinkable a mere five years
ago. (Keep in mind that the World Wide Web didn't get off the
ground commercially until only six years ago). The
Telecommunications Act of 1996 unleashed a fury of competition
in the long-staid world of telecommunications.
Now, the likes of AT&T Corp. (NYSE:T) are competing headlong
with upstart competitive local exchange carriers such as Qwest
Communications Inc. (NASDAQ:QWST) and others. America Online Inc.
(NYSE:AOL) is acquiring publisher and cable company Time Warner
Inc. (NYSE:TWX) while MCI WorldCom Inc. (NASDAQ:WCOM), unheard of five
years ago, is swallowing long-distance and wireless carrier
Sprint Corp.
The marriage mania in the telco, communications and media
industries means that these companies are far more inclined to
go with younger, less-established companies, so long as they
have a product that's fast, powerful and works. Gone are the
days when AT&T, for instance, would continue to buy billions of
dollars in telco gear from Lucent, its equipment-making
spinoff.
"The world of competition in the service-provider space is
entirely different," from that of the enterprise, or big
business market, Dzubeck said. "The Junipers, the Avicis,
they're all competitive because companies buy their products."
CISCO ON STEROIDS
None of this is lost on Cisco, which went public in 1990
and last Friday for the first time closed the trading day to
replace Microsoft Corp., the biggest software firm, as the
world's most valuable company.
Cisco Chief Executive John Chambers has said that his
company will put its acquisitive personality on steroids:
Having bought 18 companies last year, this year it expects to
buy 20 to 25 mostly young, private start-ups to get the
technology it needs but doesn't want to develop in-house to
stay the competitive course.
Cisco's high-flying stock price is a big help, too.
"It's nice to have a strong market valuation because it
makes it that much easier to acquire companies, pay a fat
premium and come in with the top bid, which is extremely
important to their overall strategy and success," said James
Slaby, a networking analyst at Giga Information Group.
Just Wednesday, San Jose, Calif.-based Cisco said it agreed
to buy two-year-old, closely-held SightPath Inc. -- which has
just 76 employees -- for $800 million in stock. SightPath makes
software that manages and speeds the delivery of Web content,
making easier such things as online learning across the Web and
within company networks.
So far, Cisco seems to be managing its growth well,
analysts said. Indeed, it is has become admired as one of the
best-run companies in the world, ranking close to General
Electric Corp., led by legendary businessman and CEO Jack
Welch, an idol of the genial Chambers.
"Cisco is nowhere near slowing down," Dzubeck said. But the
task for Cisco executives of managing the company's rapid
growth, keeping an eye on the competition, successfully
competing in the service provider market as a relative newcomer
and shepherding an ever-growing list of partners is daunting.
"All this put together is a hell of a job," Dzubeck said.
Copyright 2000, Reuters News Service |
