Cisco Vows to Lead in Switching as Net Income Falls

Cisco CEO plans to get tough on the competition.

By Sean Michael Kerner | Posted Nov 10, 2011
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Despite an increasingly challenging global economic climate, Cisco (NASDAQ:CSCO) is pushing forward to grow and refocus its business. Cisco CEO, John Chambers has also vowed to be more aggressive against competition, including Chinese networking vendor Huawei.

Cisco reported first quarter fiscal 2012 earnings on Wednesday with Net Revenues coming in at $11.26 billion, which is a 4.7 year-over-year increase. Net Income fell by 7.9 percent on a year-over-year basis to $1.8 billion. Earnings per Share were reported at $0.33 down by 2.9 percent from the first quarter of 2011.

Moving forward, Cisco provided second quarter revenue guidance for growth to be in the range of 7 to 8 percent on a year-over-year basis.

One of the areas that Cisco is aiming to grow is its service provider business. Chambers said during Cisco's earnings call with analysts, that the conversations he is his having with Service providers are not just about RFPs on router capabilities. Rather the discussions are about how to help the service providers achieve their goals, in terms of new revenues, better productivity, and in terms of achieving the mobility.

Additionally, Cisco is now taking a different approach to how they deal with competition.

"We are more aggressive on the competition, we are going to be tough on our competitors, whether their Juniper or HP and Huawei and Avaya, and it's something that I think, we were a little bit to gentle on in the past," Chambers said.

One area where Cisco is facing increasing pressure is in the enterprise routing market, especially at the low-end.

"Our challenge is enterprise routing at the low end, where low-end routing is actually folding into many other different ways of accomplishing the same goal," Chambers said.

Enterprise switching has also been an area where Cisco has faced increased competition and market pressure in recent years. Chambers stressed during the call, that switching remains central to Cisco's strategy.

"We're going to have product leadership in switching across-the-board," Chambers said. "We are going to lead in the switching market."

While Cisco facing multiple competitors around the world, Chambers specifically singled out Chinese networking vendor Huawei.

"Huawei will always compete on price, they're going to be tough on us the long run," Chambers said. "They're probably the one that will be our toughest competitor 4 to 5 years out."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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