Cisco Still a Kid in Storage

Its Andiamo is lagging the rest of the company in earnings; but don't bet against it

November 7, 2003

2 Min Read
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Despite posting overall outstanding first-quarter earnings, Cisco Systems Inc. (Nasdaq: CSCO) showed less-than-stellar storage sales.

While announcing a $1.1 billion overall profit for the quarter, Cisco CEO John Chambers noted weakness in storage area networking. He said sales of the company's Andiamo switches did not meet targets due to manufacturing and supply issues, as well as a lengthened sales cycle.

Cisco does not break out specific numbers for its SAN gear, which gets grouped into Advanced Technology with IP telephony, home networking, optical networking, security, and wireless. The Advanced Technology group accounted for 17 percent of Cisco's total product revenue and showed more than 15 percent sequential growth.

Last week, Ciscos chief competitor in the high-end switching market, McData Corp. (Nasdaq: MCDTA), lowered its guidance for the current quarter because it reached agreement with EMC and one of its other large OEMs too late to recognize the revenue for this quarter. An RBC Capital Marketsreport said one of the sticky points was pricing.

Did Cisco have the same problems? Nobody’s saying.But nobody’s counting Cisco out in the long-term storage game, either.

“Cisco came into storage networking thinking just because they are Cisco, they can instantly become a storage monster,” says Arun Taneja, founder of the Taneja Group. “Yet some of their people on the storage side didn’t even know storage terminology. They’re still going through a transition. They don’t have the reputation on the storage side yet. But they’ll get it right eventually, I’m convinced of that.”

That’s the way Cisco sees it, too.

“He [Chambers] was saying, ‘Hey, we’re the new guys in storage -- it’s going to take a little time to get there,’ ” says Cisco spokesman John Noh. “Generally, the company as a whole is optimistic about the traction we will be getting in the coming quarters.”

— Dave Raffo, Senior Editor, Byte and Switch

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