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Cisco CEO Chambers: Targeting Nokia, Ericsson ‘Big Time’; White Box the Big Threat Cisco Systems (CSCO) CEO John Chambers was kind enough to stop by Barron’s offices this morning to meet with editors, roaming across a number of topics from competition with privately held Arista Networks to invading the base station market of Nokia (NOK) and Ericsson (ERIC), to eventual competition with Amazon.com (AMZN) and other vendors of “IT as a service.” When asked what Cisco’s biggest competitive threat is, Chambers mentioned that at or near the top of the list is service providers who just buy cheap “white box” routers and switches. Talking about the server market, where Cisco is number two in “blade servers” behind Hewlett-Packard (HPQ), Chambers said, “We think if you’re going to win on this, versus white label, which will be our competitors three to five years out, or Amazon.coms, you have to win on architecture.” “I think IT as a service and white label will be our biggest competitors three to five years out,” Chambers repeated a moment later. When I pressed Chambers on whether that meant Amazon.com could simply buy cheap boxes and stitch them together and avoid Cisco gear, he seemed to concur it is a challenge for the company. “It’s more a white label, standalone product that Amazon thinks, Great, margins are 5% — my margins are 65%.” But, said Chambers, “We’re already training our sales force how to compete against Amazon Web Services.” When I pose to Chambers that Arista Networks, the Santa Clara, California startup that is storming the data center with very successful products, is the “most serious competitor” the company has, he replies “Not even close.” There has always been somebody who is going to be our toughest competitor – Cabletron, Synoptics, Wellfleet were really tough originally 15 to 20 years ago. Arista will be in one area of the market, the data center. They use merchant silicon. I know every account they’re in, I know exactly what they’re doing. Watch what happens when we announce Insieme, which will probably be this next month [he later clarified he was referring to November]. Insieme, the startup operation Cisco has funded, will blow away Arista and others in the data center with custom-designed Cisco chips, versus chips from Broadcom (BRCM) that Arista uses, Chambers contends. “There have been 100 Aristas we’ve faced.” Cisco's nPower ASIC for NCS router Cisco’s nPower ASIC, the brains of its recently announced NCS router, and soon coming to the venerable CRS core router. This package carries the code-name Pita, but it was also code-named Panini at one point. When I went to take a picture of the recently unveiled “nPower” processor that’s in the recently announced “NCS” carrier router, Chambers offered to show me other chips. He pulled out a bunch, and then quickly took one off the table when he realized it was actually the as-yet-unannounced sample silicon of the ASICs that Insieme has been developing. Chambers also said he plans to enter the cellular base station market that is the bread and butter of Ericsson, Nokia and Alcatel (ALU). “We do everything in wireless except for the radio,” says Chambers. “Now, we have a creative idea there, and I’ve just funded our first startup to see if that works.” He wouldn’t name the startup. When I asked whether there is a real chance to go after Nokia and Alcatel and Ericsson, he replied, “Oh, big time.” “The market is ripe for a new player.” Backside of the Cisco's nPower processor. Backside of the nPower processor. Chambers also made clear that for the time being, he has no intention to use the recently announced acquisition of solid-state drive maker Whiptail to enter the storage array market in competition with partners EMC (EMC) and NetApp (NTAP). Could we compete? We could, if we made other moves, if we bought one of them. Will we? No. I prefer to partner. You never say no. We’ll see where it goes. If I can get the relationships with EMC, IBM, NetApps, we’ll be better off that way. But, you know, that’s a delicate balance, including with IBM. On the subject of software-defined networking (SDN), router and switch programmability is evolving, Chambers dismisses the idea that parties such as VMware (VMW) may erode Cisco’s equipment sales. “Nobody has proven Nicira can scale,” he says, referring to the startup bought last year by VMware to do SDN. “How many do they [Nicira] have in production? Very, very little. Less than $10 million” in revenue, he argues. For more of the conversation, see also today’s Weekday Trader Extra. Cisco shares today are off 34 cents, or 1.4%, at $24.09. http://blogs.barrons.com/techtra ... box-the-big-threat/ |
