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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Tulvio Durand who wrote (12697)	2/26/1998 4:14:00 PM
From: djane	Read Replies (1) \| Respond to of 77400

Can Cisco Overcome Its Own Success? By Joe McGarvey Inter@ctive Week, February 25, 1998 zdnet.com Uncovering a chink in the armor of Cisco Systems Inc. could require the collective observational forces of Sam Spade, Sherlock Holmes and Kenneth Starr - just in case the secret vulnerability turns out to be of a nontechnical variety. As evidenced by Cisco's recent financial performance, the king of the networking hill is in little danger of losing its elevated position on the network equipment landscape. Regardless of whether it's the Internet backbone or the enterprise market, Cisco holds a commanding lead. Although I would not presume to suggest that King Cisco's throne is ripe to be toppled, some of the details surrounding Cisco's recent Gigabit Ethernet product unveiling may have exposed an Achilles' heel. Unlike Cisco rivals 3Com Corp., Bay Networks Inc. and Cabletron Systems Inc., which integrated Gigabit Ethernet into their respective product portfolios with new stand-alone boxes or product families, Cisco's first foray into the 1,000-megabit-per-second version of Ethernet essentially serves to provide an upgrade path for its existing Catalyst family of switches. So what's wrong with that? Nothing. Serving your installed base of loyal and abundant customers is a sound strategy. Every networking company is under pressure to provide its customers with a logical and affordable upgrade path. Cisco, as market leader, is under the most pressure to delicately balance compatibility with innovation. So there you have it. The slingshot most likely to bring down the networking giant is Cisco's past success. I never said it was a big chink. In fact, the "burden" of carrying around a large installed base is almost always a blessing. In the networking space, where corporations have already invested millions in routers and switches, it's not likely that information technology (IT) executives will change course at the drop of a hub. The benefits of this dependence often provide equipment makers with substantial wiggle room. And the larger the investment, the more wiggle IT managers will tolerate. A missed product delivery date or a new switch that's not quite as flexible as the competition's is not likely to prompt enterprises to change brands. However, these are heady times. New demands for performance from corporate networks as IT departments take on greater accountability for the overall performance of the business are driving the need for innovation as well as compatibility. These are times when satisfying the needs of a large installed base can be an anchor that puts a halt to the march of progress and innovation. Cisco's decision to unveil its Gigabit Ethernet product plans prior to the drafting of an international standard, which has been delayed until at least June, is a break from Cisco's policy and a possible signal that the company recognizes that it can hold an audience captive for only so long. Several analysts suggested that Cisco moved up the product rollout to quell a customer base's growing impatience with Cisco's slowness in joining the Gigabit Ethernet party. What remains to be seen is whether the product offerings from Cisco are strong enough to satisfy its customers' need for compatible technology and their desire for breakthrough products. One thing's for sure - it won't take Sam Spade to make that call. Hundreds of IT professionals will be sending Cisco a clear signal one way or the other. Cisco can be reached at www.cisco.com 3Com can be reached at www.3com.com Bay can be reached at www.baynetworks.com Cabletron can be reached at www.cabletron.com E-Mail Joe McGarvey Copyright (c) 1998 Ziff Davis, Inc. All Rights Reserved. Reproduction in whole or in part in any form or medium without express written permission of Ziff Davis, Inc. is prohibited. Inter@ctive Week and the Inter@ctive Week logo are trademarks of Ziff Davis, Inc.