Cisco, Huawei Networking Competition Heating Up

Cisco CEO John Chambers said his company is ready for the challenge from Huawei, which is putting significant resources behind its enterprise push.

Cisco CEO John Chambers, who last month called Huawei Technologies a more significant networking competitor than Hewlett-Packard, is saying that his company is in a good position to not only defend its massive footprint in the United States, but also to challenge Huawei in its native China.

Speaking on a conference call with analyst and journalists May 9 to discuss Cisco's quarterly financial numbers, Chambers said Huawei€”which last year kicked off an aggressive enterprise business to challenge Cisco and others not only in networking, but in such areas as collaboration and devices€”is the latest in a long line of vendors looking to grab business from Cisco.

€œEvery year that I've been here, there's either been a key large competitor€”a Dell, an IBM, a Microsoft, at times even an Intel€”that was going to come at us and unseat us in an area, and there are always product transitions every year that people get concerned about,€ Chambers said in response to an analyst question. €œAnd for 20 years, we've come out of it stronger €¦ in every one of those key areas. So that's not a guarantee of how it will turn out in the future, but it does mean we react very, very effectively.€

Cisco, long the dominant player in the networking space, in recent years has seen significant challenges from companies like HP, Juniper Networks and Avaya, which analysts have said were able to take advantage of Cisco€™s efforts to grow into new markets to steal some market share. The rivals in part have argued that their offerings were cost-effective, high-quality alternatives to Cisco€™s more expensive products.

Chambers during the call noted that HP€”armed with its acquisition of 3Com€”initially made a strong push in networking, due in large part to its already strong position in the enterprise. It took Cisco six to 12 months to respond, arguing that lower prices for a €œgood enough€ networking infrastructure didn€™t always pay off, he said. However, he doesn€™t see Huawei having the same strong enterprise position at HP.

€œI think you're going to find we are very tough versus Huawei,€ Chambers said. €œNot just in coming into our home turf, but watch how we did in China versus what Huawei did in China. €¦ I think you'll see us very confident in how to compete against them. They'll be a good, tough competitor. They€™ve got a lot of weakness, and we're going to make [those weaknesses] very plain to our customers.€

In an interview with The Wall Street Journal in April, Chambers said Huawei is a formidable competitor that doesn€™t €œalways play by the rules€ when it comes to intellectual property. The comments drew a sharp rebuke from Huawei officials in the United States, who called the claims €œunfortunate.€

Huawei in recent months also has seen some setbacks due to the perception that the company has a too-tight relationship with the Chinese government and military that has caused concern over data security among some potential partners and customers. Huawei officials have denied those claims as well.

During the May 9 conference call, Rob Lloyd, Cisco€™s executive vice president for worldwide operations, again raised the issue of honesty and security.

€œ[In] today's cloud-centric world, integrity is everything,€ Lloyd said. €œThe privacy of information, how data is protected, is forefront in our customers' mind in a cloud-centric world. That's not the forte of Huawei. And as they examine partnerships to enter markets around the world, this integrity gap is clearly recognized by our partners, and I think €¦ that's being reflected in their lack of success so far in penetrating the value channels that Cisco takes to market.€

Forrester Research analyst Henry Dewing said in a May 9 post on the company€™s blog that Huawei, in an apparent effort to be more transparent, had provided financial details, including the fact that it grew revenue by 12 percent last year, to $32.4 billion. In talking to analysts, Huawei executives also spoke about their efforts in the enterprise and device markets, pointing out that these efforts were in the early stages.

€œIt even felt as if Huawei consciously played down its ambitions in order to downplay expectations,€ Dewing wrote. €œHowever, of course, expectations regarding Huawei€™s enterprise business and device activities amongst market observers are high. It is expected that Huawei€™s financial performance will improve as the enterprise business group starts generating larger revenues in the coming years.€

Huawei€™s Enterprise Business division was established last year, and has a staff of about 20,000 and sales of about $1.6 billion, he said. The focus includes networking, security, unified communications and cloud data centers.

€œHuawei is leveraging current and past successes in delivering solutions directly to large enterprises to drive growth,€ Dewing wrote.