Cisco to offer upgradable routers

The new routers are designed to save telephone companies money and alleviate network upgrade headaches, as Cisco seeks to keep pace with Juniper and other smaller rivals.

Tech Industry
Cisco Systems plans to offer a new version of its high-end routers that customers can upgrade instead of replace.

The San Jose, Calif.-based company said the new routers were designed to save telephone companies money and to alleviate network upgrade headaches, especially since they are still reeling from a severe downturn.

"We're always trying to get our customers to gradually upgrade their network, and we really emphasize the notion of total cost of ownership," said Mike Volpi, senior vice president heading up Cisco's routing group.

"Instead of forcing them to buy a new one, we allow them to...protect all the money that they've spent on the network," he added.

The new Cisco 12800 core routers, which would be used on long-distance networks and other new products, are in testing now and will be available starting in January, Volpi said.

Cisco is counting on the 12800 to help the company maintain its dominance as it allows customers to quadruple the capacity of existing Cisco routers without interrupting service, Volpi said.

Analysts said the products allow Cisco to keep pace with Juniper Networks and other smaller rivals as it develops its next-generation router, expected next year.

"Cisco has been somewhat behind in terms of having a much higher-scale core router," RHK analyst Roz Roseboro said.

"It's a fantastic defensive move," she added, referring to the new router. "If Cisco can keep somebody from buying a Juniper, an Avici (Systems) or somebody else's product, that's a good thing."

In the near term, anything that allows telephone companies to avoid replacing their routers every two years is welcome, Roseboro said.

Over the last few years, telephone companies have slashed spending due to excess capacity on the network, forcing their suppliers to cut jobs and sell businesses. Only now are things beginning to stabilize.

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Cisco has been hurt less by the slowdown because it gets only about 20 percent of its sales from the telecom sector, but it sees that as a growth opportunity as carriers switch from traditional circuit switching to the transmission of voice and data over the Internet.

Even if it's not the majority of their sales, Cisco is king of routers for telephone companies, an annual market Volpi estimated at $4 billion and growing. The company sported a 55 percent share of the service provider segment in the third quarter, leading Juniper with a 26 percent share, according to research firm Gartner.

As for the new routers, Yankee Group analyst Mark Bieberich said Cisco's chances for success are good because it has such a large installed base of customers who do not want to start over with new equipment.

"This announcement is significant for carriers because they can upgrade those platforms without having to purchase brand new gear that they would have to evaluate, test and install," said Bieberich, who called the 12800 a "more practical approach."

However, Cisco will still need to get its next-generation products out in the next 12 to 24 months to address competitive threats and carrier requirements, he said.

Story Copyright  © 2003 Reuters Limited.  All rights reserved.

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