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Cisco Distracted?
Lags in a quarter when everyone else's results were strong
February 9, 2006
2 Min Read
1:15 PM -- As is usually the case, Cisco didnt say enough about its storage revenues during its earnings call to give a full picture of how its Fibre Channel switch business is doing.
But Cisco did disclose that its storage revenue rose 9 percent year over year, giving Wall Street analysts enough insight to realize this represented a steep decline from the previous quarter. A decline in a quarter where storage systems partners EMC, Hitachi Data Systems, and IBM all reported double-digit sequential growth suggests that Cisco lost share to rivals Brocade and McData. We’ll know more when Brocade reports earnings Feb. 16 and McData on March 9.
According to analyst Aaron Rakers of A.G. Edwards, Cisco’s storage revenue for last quarter was $77 million, down 29 percent from $107 million the previous quarter. The slip may be temporary -- Cisco’s storage numbers often vary sharply from one quarter to another, and the $107 million quarter it was coming off of was by far its best ever for storage.
Still, the sequential drop comes at a time when people in the storage industry whisper that Cisco is losing interest in Fibre Channel switching. FUD perhaps, but we’ve already seen several interesting tidbits regarding Cisco storage this year that suggest all is not well:
Cisco’s 4-Gbit/s director probably won’t be out before April, which would put it more than six months behind Brocade in 4-Gbit/s directors. (See Cisco 4-Gbit Director MIA).
Former Brocade CEO Greg Reyes told BusinessWeek that Cisco was close to buying Brocade in late 2004 before an investigation into Brocade’s stock options accounting methods scared Cisco off. If true, that might indicate that Cisco execs aren’t all that impressed with their existing Fibre Channel products. Or perhaps they felt the best way to compete with Brocade was to get rid of it.
The old Andiamo gang of Mario Mazzola, Luca Cafiero, Prem Jain, and Soni Jiandani haven’t "retired" as Cisco announced last July. The crew that developed Cisco’s Fibre Channel switches moved on to a new venture, probably in competition with their former company. (See Andiamo Vets Go 'Nuova'.)
Maybe one or more of these developments will prompt Cisco CEO John Chambers to spend a little time on storage during his next earnings call.
— Dave Raffo, Senior Editor, Byte and SwitchOrganizations mentioned in this article:
A.G. Edwards
Brocade Communications Systems Inc. (Nasdaq: BRCD)
Cisco Systems Inc. (Nasdaq: CSCO)
EMC Corp. (NYSE: EMC)
Hitachi Data Systems (HDS)
IBM Corp. (NYSE: IBM)
McData Corp.
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