Cisco Beefs Up Sales Incentives Ahead of Earnings

Cisco is fattening margins and giving rebates on select switches and routers to solutoin solution providers push core infrastructure products to customers that have put off upgrading or refreshing networking equipment.

After watching its core networking gear sales plummet in the first quarter, Cisco Systems is launching a stimulus package of its own: bounties in the form of padded margins and rebates of up to 15 percent of sale prices to solution providers who proactively sell switches and routers.

Cisco, which will announce its third-quarter earnings May 6, has previously reported sharp declines-by some estimates 20 percent or more-in sales of core switches and routers. Core infrastructure products make up one-half of Cisco's overall revenue; advanced technologies, such as unified communications and telepresence, accounts for 26 percent of the company's sales.

While Wall Street analysts are not expecting Cisco's earnings to rebound, the networking giant is looking to use its cash-rich war chest to fund price cuts, sales incentives and rebates to solution providers who mine the existing install base of networking equipment for refresh opportunities. By Cisco's estimates, more than $23 billion worth of switches and routers are at or beyond their five-year service life, making them ripe for refresh and upgrades.

"We want partners [to] go out and go after the install base," says John Growdon, Cisco's senior director of worldwide channels. "That's where we believe there's opportunity."