This has been a somewhat of a watershed week for Cisco. By announcing the year end (US and Canadian) office closures the company has acknowledged that its business will be depressed and cost savings is in order. In addition to the lower sales and earnings forecast, Cisco is facing competition from ProCurve- a fast growing HP business unit that has increased market share in the $20 billion market for local area network and wireless switches. That market provides the bulk of Cisco’s revenues and profits. Cisco is also looking at how it can leverage its server virtualization and automation tool kit to get more business in the nex gen enterprise data center market.
Finally, Cisco has entered the systems integration business by agreeing to build a new mobile WiMAX network in Malaysia with YTL e-Solutions Berhad (YTLE), a subsidiary of YTL Corporation Berhad. Under that agreement, Cisco will build and integrate YTLE’s WiMAX core network – which includes IP CORE, Operating Support Systems, Billing Systems, Proactive Network Operating Center (PNOC), and Interoperability Testing labs – to help YTL quickly operationalize and launch new services. This type of collaboration is a change in Cisco’s business model – from network equipment provider to systems integrator.
The individual news items follow:
"Given the difficult macroeconomic conditions, we believe our cost control focus at this time is appropriate, while still providing our partners and customers with critical services over the holiday period," the company said
H.P. Unit Sheds Stepchild Status to Take on Cisco
HP has nurtured its ProCurve business from a few hundred million dollars in annual sales to about $1 billion. It is now H.P.’s second-most-profitable business and one of its fastest-growing. Now H.P. is directly attacking Cisco in a bid to capture a larger chunk of the $20 billion market for local area network and wireless switches. "H.P. has declared war," said Mark Fabbi, a networking analyst at the research firm Gartner. "H.P. has the potential to completely change the dynamics of the networking industry."
H.P.’s network hardware revenue had grown 40 percent over the last two quarters, cementing the company’s position as the No. 2 player in the market. H.P., based in Palo Alto, Calif., now accounts for 7 percent market share by revenue, compared with Cisco’s 77 percent.
Westminster College in Fulton, Mo., has switched to H.P. as a supplier. "A lot of people in the industry say that Cisco has a certain arrogance," said Scott Lowe, the college’s chief information officer. "With real competition in the marketplace, I think you will see there is a desire for people to get away from that arrogance."
Some of Cisco’s strongest critics are hardware resellers. They are hoping that a muscular competitor like H.P. will place pressure on Cisco to give them more favorable sales and services terms. Although Cisco itself makes about 70 percent gross profit margins on its LAN switching gear, the resellers "can’t make any money on Cisco," said Brad Reese, who sells refurbished Cisco equipment.
Enterprise customers may see opportunity in the turmoil by using Cisco’s tools (virtualization, automation, clouds, etc) to let them cut costs and still strategically invest in their data center business.
YTLE Enters a Strategic Collaboration with Cisco to Launch WiMAX Core Network in Malaysia
YTL e-Solutions Berhad (YTLE), a subsidiary of YTL Corporation Berhad, entered a strategic collaboration with Cisco Services Malaysia Sdn Bhd (Cisco) to establish its WiMAX core network in Peninsular Malaysia. Under the agreement, Cisco will build and integrate YTLE’s WiMAX core network – which includes IP CORE, Operating Support Systems, Billing Systems, Proactive Network Operating Center (PNOC), and Interoperability Testing labs – to help YTL quickly operationalize and launch new services. The business relationship is in line with YTLE’s goal to provide mobile internet services nationwide.
Upon the nationwide commercial service launch in 2009, Malaysians in both urban and rural areas will be able to simultaneously enjoy 4G converged services – mobile voice, data and video with full mobility, using personal WiMAX mobile devices over the YTLE’s WiMAX network.
"We have chosen Cisco because of its proven expertise and leadership globally in IP CORE network technology and experience in setting up PNOC. We need a technology partner that can enable a fast and efficient WiMAX core network establishment. Cisco has proven it with their innovative and leading-edge IP technology solutions," said Executive Chairman and Managing Director, YTL e-Solutions Berhad, YBhg. Tan Sri (Dr) Francis Yeoh. "Together with Cisco, YTLE will create a WiMAX centre of excellence in Malaysia to become a world destination for WiMAX technology development," he added.
According to Cisco Executive Vice President, Services & Chief Globalization Officer, Wim Elfrink, "This collaborative model is a first for Cisco, and demonstrates how governments and technology leaders can together provide the network as a ‘fourth utility’ for delivering services that enhance business productivity and quality of life. By enabling the mobile Internet, YTLE and Cisco are helping to enhance the global competitiveness of Malaysia and its citizens." Elfrink added that this new type of collaborative relationship illustrates how Cisco is innovating with new business models adapted to the diverse needs of customers worldwide.
YTLE plans to deliver affordable WiMAX packages with fast, wide coverage and always-connected mobile internet services that will cater to and complement the personal and business communication needs of consumers as well as the enterprise community.
YTL e-Solutions Berhad (YTLE) is listed on the Mesdaq Market of the Bursa Malaysia. Through its subsidiary, Y-Max Networks Sdn Bhd, it holds a Worldwide Interoperability for Microwave Access (WiMAX) licence for a 2.3 GHz wireless broadband access spectrum, which was awarded by the Malaysian Communications and Multimedia Commission (MCMC) to roll out a nationwide WiMAX network in Peninsular Malaysia.
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