Cisco Systems Inc. Dow Jones Newswires -- May 14, 1999
Cisco, Lucent Vie For Leadership In Converged Network Mkt
By Mark Boslet
LAS VEGAS (Dow Jones)--The two companies come from opposite sides of the fast-growing networking market - and they are hurling right at each other.
Lucent Technologies Inc. (LU) and Cisco Systems Inc. (CSCO) have different heritages. But they have become the
most closely watched drama on the data and telecommunications networking stage.
This week, corporate technology managers gathered in Las Vegas at the Networld+Interop trade show, where they searched for new high-speed switches, connections for mobile workers and security for computer communications.Their most difficult task, however, was to sort through options for combining voice and data systems to create single, money-saving, converged networks.
"There isn't a customer who doesn't have it on their minds right now," said Karyn Mashima, vice president of data networking systems at Lucent.
But as corporate technology managers pore over ways to integrate voice, data and video communications and usher in a new age of networks - where, for example, telephone conference calls can include video clips - they run directly into Cisco and Lucent. Both companies are staking out this market as their own, and industry executives don't expect a quick resolution to the standoff.
A formidable battle is taking shape. But one in which there aren't likely to be quick winners or losers. Supplying equipment for converged networks is a large opportunity, and many companies will be successful, including other leading vendors such as Nortel Networks Corp. (NT), Alcatel S.A. (ALA), and L.M. Ericsson Telephone Co. (ERICY).
For "quite a while, there will be a number of key players" and not just one, said Cisco's Peter Alexander, vice president of enterprise marketing.
But that period of parity won't last forever.
Down To A Few Players
Because of consolidation, "I think we're down to a few players already," said Donal Byrne, senior vice president of corporate marketing at Fore Systems Inc. (FORE). The Warrendale, Pa., company has agreed to be purchased by Britain's General Electric Co. PLC, making it one of the companies seeking enough worldwide heft to be a major global competitor.
Looking farther ahead, "I think there will be some separation of the men and the boys on this one," Byrne said.
Corporate technology executives say a company's focus, or
vision, for this new-world technology may be what separates the market leader from those who follow. The battle may also be over which company comes to dominate the switch market at the edge of the WAN, or wide area network, where phone company networks meet those of corporations.
Increasingly, Cisco and Lucent are moving into one another's space - but from different directions, said Andy Schopick, an analyst at Nutmeg Securities.Cisco, market leader in supplying computer data networking gear to corporations, is pushing into the service-provider market of phone companies and into telephony gear for corporations.
Lucent is moving in the other direction. A dominant force
in the world of phone company switches and in PBX, or public exchange carrier, phone-service boxes used by corporations, the company is rushing into the market for data equipment.
In a keynote address at the Networld+Interop show, Cisco Chief Technology Officer Judith Estrin spelled out her company's vision for the market. Telecommunications is going from large proprietary systems - such as the expensive phone circuit switches Lucent makes - to distributed systems, just as the world of computing moved
from mainframes to distributed networks of desktop PCs, she said.
Customers will make the change not just because costs will be reduced, but because they want a system that offers new applications using video, voice and data, she said.
Lucent believes its $8 billion business with voice systems gives it a substantial starting point for providing evolutionary products to customers, Vice President Mashima said. For instance, the company has installed an IP, or data-oriented, trunk in its Definity PBX box.
Lucent also holds up its planned purchase of Ascend Communications Inc. (ASND) as an important move to better
participate in the WAN edge market and to deliver "intelligent switches" to move voice.
"Customers are most interested in deploying applications quickly because e-commerce is chomping at their heels," Mashima said.
Eat Their Young
Both Cisco and Lucent are eager to point out that the other must, as is said in the industry, eat its young to survive. What that means is every new generation of technology puts the previous generation at a disadvantage.
Lucent, Cisco points out, will likely find its big circuit switches that have long sat at the core of the telephone network, vulnerable to variety of new, more data-oriented gear in the age of converged networks.
Cisco, on the other hand, has past generations of data-oriented equipment, including routers, to sacrifice to tomorrow's portfolio of gear better accommodating voice traffic.
Cisco also has to prove its ability in the WAN, analysts say. The company's recent decision to halt development of a TGX ATM, or asynchronous transfer mode, switch highlights this need.
Cisco's Alexander said plans were changed when Cisco realized it could put the new functions of the switch on its present MGX platform.
Users want maximum functionality and a minimal number of platforms, he said.
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