Close
  • Latest News
  • Cybersecurity
  • Big Data and Analytics
  • Cloud
  • Mobile
  • Networking
  • Storage
  • Applications
  • IT Management
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Menu
Search
  • Latest News
  • Cybersecurity
  • Big Data and Analytics
  • Cloud
  • Mobile
  • Networking
  • Storage
  • Applications
  • IT Management
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Latest News
    • Networking

    Cisco Limping From Sudden Shortfall

    By
    eWEEK EDITORS
    -
    April 23, 2001
    Share
    Facebook
    Twitter
    Linkedin

      Cisco Systems galloped like a racehorse for 10 years. Bred for speed and growth, it never slowed its breakneck pace.

      When the racehorse crashed into the wall last week, announcing $2.5 billion in excess inventory and revenue 30 percent lower than the previous quarter, critics mused that it was a shame that Cisco wasnt part-plowhorse, slow and cautious.

      But thats just not Cisco, the company that grew from nothing to one of the largest companies in the world, said Scott Cleland, CEO of The Precursor Group, a Washington, D.C. market research firm.

      “Its like saying a thoroughbred should have been a camel, should have been able to walk through the Sierra Desert, Cleland said. “Theyve always gambled on the sector and the economy growing. Their whole philosophy is a gamble. Its easy to throw stones now, but it certainly worked extraordinarily for a long time.

      The company has long preached the power of networking. “Cisco believed in the religion of the Internet — that this is different, that were different, said Paul Sagawa, an analyst at Sanford Bernstein.

      Cisco CEO John Chambers compared the slowdown in spending by carriers to a 100-year flood, massive and out of the blue. “We went from a 70 percent growth rate to negative growth in January, he said. Cisco had so many orders late last year that it was telling customers delivery would take 26 weeks. Although the company tried to balance its books nightly, it wasnt prepared for the sudden falloff in orders and the cancellations. “No system can protect you from that, he said.

      As the economy slowed and competitive local carriers were gasping with unworkable business plans, why was Cisco still financing deals with those troubled competitors?

      Ammar Hanafi, Ciscos vice president of business development, had an answer last week. “Last year, vendor financing was part of the package that our customers evaluated on, he said. “Our accounting practices are so conservative that we have almost a disincentive to do vendor financing, but that was where the marketplace was. Well continue to be very conservative.

      He said Cisco had $475 million in outstanding debt-structured loans to service providers at the end of December.

      Cisco has enough cash on hand — about $4 billion at the end of 2000 — to weather the downturn. But 50 percent annual growth rates may be gone forever.

      The 40-year average for technology growth is 11 percent per year, and that appears to be an ironclad rule that not even wavelength routers can break. “It represents our economys ability to absorb new technology, Sagawa said. “Theres not a way to force-feed it into society.

      Cisco grew to be a giant through shrewd acquisitions, but struck out in its $500 million purchase of Monterey Networks. The California start-up was to provide the technology for Ciscos wavelength router, but the project was canceled this month. But Hanafi said acquisitions will continue to be key to the strategy. “Economics change, markets change, our strategy does not change, he said.

      Analysts dont doubt Cisco will be a prominent player once inventories are played out in 12 or 18 months.

      “Theyre winners and theyre leaders, theyll bounce back, Cleland said. “There are home run hitters and singles hitters. Cisco swings for the fences, and sometimes you strike out.”

      Avatar
      eWEEK EDITORS

      MOST POPULAR ARTICLES

      Android

      Samsung Galaxy XCover Pro: Durability for Tough...

      Chris Preimesberger - December 5, 2020 0
      Have you ever dropped your phone, winced and felt the pain as it hit the sidewalk? Either the screen splintered like a windshield being...
      Read more
      Cloud

      Why Data Security Will Face Even Harsher...

      Chris Preimesberger - December 1, 2020 0
      Who would know more about details of the hacking process than an actual former career hacker? And who wants to understand all they can...
      Read more
      Cybersecurity

      How Veritas Is Shining a Light Into...

      eWEEK EDITORS - September 25, 2020 0
      Protecting data has always been one of the most important tasks in all of IT, yet as more companies become data companies at the...
      Read more
      Big Data and Analytics

      How NVIDIA A100 Station Brings Data Center...

      Zeus Kerravala - November 18, 2020 0
      There’s little debate that graphics processor unit manufacturer NVIDIA is the de facto standard when it comes to providing silicon to power machine learning...
      Read more
      Apple

      Why iPhone 12 Pro Makes Sense for...

      Wayne Rash - November 26, 2020 0
      If you’ve been watching the Apple commercials for the past three weeks, you already know what the company thinks will happen if you buy...
      Read more
      eWeek


      Contact Us | About | Sitemap

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Property of TechnologyAdvice.
      Terms of Service | Privacy Notice | Advertise | California - Do Not Sell My Information

      © 2021 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×