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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: ibrandybuck who wrote (56714)	11/4/1998 10:40:00 AM
From: thebeach	Read Replies (1) \| Respond to of 61433

We just cracked 48,maybe we will hold today?What do you think now Tim?

To: ibrandybuck who wrote (56714)	11/4/1998 11:49:00 AM
From: Mighty Mizzou	Respond to of 61433

OT - Analysts Flog Cisco Pricing Schemes by Michael Cooney and Paul Desmond Network World 10/19/98 Vol. 15, No. 42 Whats more important, getting a good deal or going with the premium brand? It seems Cisco customers are being forced to make that choice more and more, at least according to analysts at last weeks GartnerGroup Symposium ITxpo 98. The network giant's pricing strategies took a whipping from Gartner analysts, who say Cisco is boosting profit margins at a time when most of its competitors are shrinking profits. While discounts are available, the perception is that Cisco just wont cut a deal when it comes to selling network gear. Cisco CEO John Chambers' response was that the company will maintain a premium for Cisco-branded gear and services while helping customers understand the total-cost-of-ownership benefits of building networks with Cisco equipment. "We think we can justify a 25% price premium because our total cost of ownership - that includes performance and support of the equipment - gives us a leadership role," Chambers says. "If customers just want a product, they can get it cheaper through third-party sales channels." The premium charges are helping keep Cisco revenue healthy. Joe Baylock, VP and director of network research at Gartner pegged the company's revenue at $10 billion for fiscal 1998, up from just over $7 billion the previous fiscal year. He expects the company to have revenue of $35 billion in 2002 while its profit margins remain steady, in the 50% to 60% range. "It's not uncommon for some of our competitors to discount equipment 60% to 70% to make a deal - we just wont do that." Chambers says. "Our customers tell us that price of products isnt in the top four or five list of their concerns." Some sales issues revolve around direct vs. indirect channel, Baylock says. In practice, Cisco accounts that spend $4 million per year or less are moving to the indirect channel, while the direct channel is reserved for those above $4 million - the so called high-touch accounts. Indirect sales customers see a 27% volume discount, while larger direct sales customers achieve higher discounts. At a session in which Gartner presented its Cisco outlook, a show of hands indicated roughly 5% of the users present received discounts of 25% or less, about 90% were in the 25% to 35% discount range, and another 5% claimed they got price breaks of more than 35%. About 100 users participated in the survey. Chamber's touts Ciscos' service and support - either via its own personnel or third-party branded companies - as two reasons for price premiums. But Baylock says Nortel and Lucent have large, well-respected internal service and support organizations that bring more direct profits. "Cisco's increasing reliance on third parties for ongoing maintenance and support will limit Cisco's ability to meet the long-term requirements of it's largest customers," Baylock says. That could put the squeeze on some of those profit margins in the future as those companies encroach on Cisco's markets. Baylock offered some tips for ensuring users get the best deal from Cisco: use a formal RFP; segment the negotiation by product, then tally the costs, rather than doing a big bulk deal; negotiate at the VP of sales level or above; and consider all sources of volume.