Cisco: Leaner, meaner, more aggressive?

Cisco: Leaner, meaner, more aggressive?

Summary: Cisco is positioning to fend off competitors such as Juniper, HP and Avaya.

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Cisco Systems' analyst meeting went so this well that analysts are expecting the company to start punching back Juniper, HP and other rivals.

On Tuesday, Cisco CEO John Chambers outlined the company’s new targets for the next three years:

  • Revenue growth at 5 percent to 7 percent;
  • Continuing economic uncertainty;
  • Operating margins of 25 percent or show;
  • Earnings per share growth at 7 percent to 9 percent.

But the biggest takeaway is that Cisco doesn't plan to pull any punches with its rivals. Stifel Nicolaus analyst Sanjiv Wadhwani said:

The “new” Cisco will be aggressive against competitors. The company seems to be particularly targeting Juniper, who it sees as being the most vulnerable and spread too thin. Cisco pointed out that aggressive stance against competitors does not necessarily translate into aggressive pricing; in fact the company will intensely focus on gross margins going forward with value engineering.

Wedbush analyst Rohit Chopra said:

Cisco takes the gloves off and adopts an aggressive posture versus key rivals. Management reiterated its intention to aggressively protect share and pursue growth several times during the presentation. As part of its strategy, management said it will seek to compete aggressively with Juniper (in switching/routing), HP (in all areas) and Avaya (in switching/routing). While acknowledging that Cisco was playing defense earlier in the year, given its completed restructuring and subsequent stumbles at Juniper and HP, management believes it can compete effectively. Huawei, however, poses a tougher challenge and the company expects to take the fight to China, particularly in the service provider market.

Jefferies analyst George Notter said:

Cisco is talking tougher on their desire to compete more aggressively for deals that – in the past – they might have passed up because of profitability concerns. Of course, HP – with much lower average corporate margins – remains a significant threat in the Switching business going forward.

Add it up and there's going to be one fun battle ahead in the networking market.

Topics: Cisco, Hewlett-Packard

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5 comments
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  • Cisco is not done contracting

    Cisco needs to continue to focus on the core. Calling HP a competitor and attacking the edge market will continue to be a distraction for Cisco and put a strain on earnings.
    Your Non Advocate
  • how about coming out with a decent product for a change?

    Cisco haven't done it in decades (aside from Nexus that i don't know much about). I'm running out or reasons to choose cisco for anything nowadays (including switching and routing). No bi-directional flow-control on 10-gig port, even enterprise blades on 4500 are 2:1 overprovisioned, lower end 2900 we're using for out of band management acces don't support more than 64 vlan per spanning tree instance and only 4 spanning tree intances - say what? Is this still enterprise network hardware? Cause it's priced like enterprise - that's for sure.
    vgrig
    • RE: Cisco: Leaner, meaner, more aggressive?

      @vgrig

      I'm glad to hear that even large enterprises feel their pricing is too high. I'm part of a small company with less that 300 nodes in 4 locations. But we have to use Cisco switches since we installed a Cisco phone system and do PoE. For me, companies like HP offer way more bang for my buck. I want to like Cisco, but can't get over the price problem.
      APSDave
  • When everybody's in charge, nobody's in charge

    Does this mean that Cisco is ditching the "kumbaya" management style in which the camels are all designed by collaborative diverse committees in total harmony and consensus? If so I might be tempted to buy some stock.
    Robert Hahn
  • Cisco has lost the customer focus...

    and until it gets it back, there will be no returning to its once greatness.

    By concentrating on the competition rather that improving its customer image, it's showing that it does not even realize where the weaknesses lie.

    Cisco's price premium was based on the support it gave. HP changed that game by offering lifetime support without added cost.

    Juniper has changed the advantage Cisco had with the IOS. And with the changes Cisco has made with the new version of the IOS including what you can download from the support site, further alienates possible Cisco candidates. Argue if you will, but Dynamips allowed anyone interested to train with Cisco devices ensuing a pipeline of people wanting Cisco; now that's gone. Juniper's OS can still be emulated and played with.

    Cisco is not going to disappear, but they have to re-evaluate their strategy to stay at the top though.
    pazmanpro