| HOME | NEWS ALERTS |
Cisco
Stumbles in Its Storage-Switch Effort
After three quarters of shipping product, Cisco is well behind its target of doubling storage revenue every quarter. The best Wall Street estimates -- Cisco refuses to break out detailed storage revenue -- show Cisco's storage bookings grew from $10 million in the third quarter of fiscal 2003 to $17 million in its fiscal 2004 first quarter. That performance earned the company a market share of 3%, compared with 50% for Brocade and 36% for McData, according to the Dell'Oro Group, a research firm.
"We were a little bit disappointed with our progress in the storage area networking markets, where we experienced some manufacturing issues, longer-than-anticipated sales cycles and a few other challenges," CEO John Chambers conceded during Cisco's earnings call in November.
What's more, if investors were nervous about McData and Brocade last year when Cisco entered the storage-networking-switches arena, they got over it in 2003. The two companies have each appreciated by about 45% this year, just a hair less than the Nasdaq Composite as a whole. Cisco, meanwhile, is up over 70% year to date.
But McData and Brocade are hardly out of the woods. Cisco hasn't made any big mistakes in storage, analysts note. It has good products, a sales force that is too smart to alienate the established distribution channels, and most importantly, lots of time and deep roots in business networking. "In two years they will be taking major market share," predicted Nancy Marrone-Hurley, senior analyst with the Enterprise Storage Group.
Even the competition admits to being concerned: "With Cisco in the race, it doesn't matter how their horse is running. They're still in the race," said Jay Kidd, vice president of technology for Brocade.