Hang-Tough Time for Cisco

Can Cisco router Systems Chief Executive John Chambers still turn the networking giant around?

That's the question on the minds of many tech investors in the wake of yet another disappointing quarter. On top of mediocre earnings, Chambers continued to lower expectations. Increased competition from Juniper Networks (ticker: JNPR; see "Juniper: Emerging Network Star"),buy cisco switch  Hewlett-Packard (HPQ) and China's Huawei (002502.China) is taking its toll. But so are internal organizational issues as well as big-picture strategic quandaries, such as how to reposition the company during the current sea-change in enterprise computing.

It's tough to bet against Chambers, who has been at the helm of Cisco (CSCO) for 16 of its 26 years. He is the supersalesman who directed the company through the period of hypergrowth driven by the historic build-out of the commercial Internet. And speaking personally, I have to say he is one of the most respected CEOs I've met in my nearly 25 years as a business reporter. His utterances move markets.

That said, buy cisco router Chambers finds himself fighting some of the toughest battles of his career on multiple fronts. In addition to increased competition, Cisco is suffering from talent drain and a lack of clear direction in pursuit of new products and markets. Exhibit A: the recent closure of the Flip digital video device unit.

Late last year, my colleague Michael Santoli argued that if Cisco reached its long-term revenue growth goals of 12% to 17%, shares would rise to 27 ("Ending the Cisco Skid," Dec. 27, 2010). Shares were about 20 at the time. By February, the stock had risen a couple of bucks. But last Friday, after a week of lousy news, shares closed at 16.88.

In the short run, with shares trading a bargain-basement nine times forward earnings, Cisco's stock could reward investors yet again. But when? And will the recovery have staying power? Sterne Agee analyst Shaw Wu, who has a Buy recommendation, says it may take a "few quarters to fix" the problems. But eventually, air-lap1142n-e-k9 the bull sees shares surging back to 29 over 12 months.

Cisco blamed reduced government spending and lower margins on newly introduced products for some of its woes. It acknowledged that competition has stiffened. Switch sales were down 9%. Chambers announced $1 billion in cost reductions, including potentially the largest layoff in company history. A Cisco spokesman said that recently launched new products will see fatter profit margins over future quarters as they ramp up and gain more scale.

THE GOOD NEWS IS THAT DEMAND for networking gear is growing. The bad news is that the company is suffering from problems that are specific to Cisco, air-ap1142n-e-k9 of which some could be systemic and long-term.

In the short term, bulls such as Wu might be right. But over the long haul, Cisco may continue to struggle to find new growth. A recent study by Gartner, the research outfit, entitled "Debunking the myth of the single-vendor network," identifies a huge threat to its core business. 3kx-nm-1g has long told customers that owning a Cisco-only network is more cost efficient, which locked in corporate customers at higher prices. But the study contends that the introduction of a second vendor, such as Juniper or HP, could actually decrease the total cost of ownership of a data network by 15% to 25%.

If that's true, Chambers really has his work cut out for him.

Canvas Systems Expands Networking Support for Cisco IOS

Canvas Systems is pleased to announce a new support option for Cisco IOS. Leveraging its channel partnerships, Canvas can now offer third party support for Cisco IOS, including software bug fixes. Canvas' third party support program, CanvasGuard, consists of both hardware and software support for Cisco switches, routers, firewalls and other networking devices. Flexible options include service levels ranging from next business day support to onsite hardware spares.

"With this addition to the CanvasGuard program, we are able to provide a fully certified and cost-effective solution for all of our network customers," says Paul Smith, VP of Sales Operations for Canvas. "Customers with genuine Cisco router equipment and valid licenses now have a clear alternative to Smartnet."

CanvasGuard maintenance programs offer support across all OEM platforms including Dell, IBM, HP, Sun and Cisco routers. Support is provided by OEM certified technicians; currently maintaining over 850 customers and 23,000 servers. CanvasGuard also provides both lifetime and advanced warranty programs, depending on product. Designed to enhance the total life cycle of your data center, CanvasGuard also provides a Real-Time Spares Management program to ensure the parts you need are on hand when you need them.

About Canvas Systems:
Founded in 1998, Canvas Systems is the leading global and independent supplier of IT Hardware and Support - providing the largest channel alternative for data center and hardware services. Based in Norcross, Georgia, Canvas also has regional headquarters in the United Kingdom and Netherlands. Canvas specializes in providing clients with faster and affordable green IT products and services including: Data Center Hardware, Third-Party Maintenance, Financing and Rentals, Infrastructure Services and Remarket and Recycle programs.

Canvas has an extensive $100 million inventory, offers same day shipment to over 70 countries and saves significant money for clients ranging from Fortune 500 companies to small businesses. Canvas Systems is part of the Platinum Equity Portfolio. For more information, call 1-877-CANVAS-9 or visit

Cisco opens green datacenter to support internal operations

If you are going to be pushing your datacenter vision out to corporate America and expect to have any credibility, it is important that you be running your own business on the infrastructure that you are selling.  With the opening of their new Allen, TX datacenter,  refurbished Cisco is doing just that, rolling out a new green datacenter that is operating on the full portfolio of Cisco datacenter hardware and software.

From 100 KW of solar cells generating power on the roof (for use by the offices, not the datacenter hardware) to the plans to use ambient fresh air to reduce cooling costs, Cisco has attempted to at least touch all the bases in the current green datacenter model. But with an eye towards practicality, the expected PUE of this new facility is only 1.35.

This isn’t a bad number, but with every new facility in the datacenter business trying to post PUE ratings of as close to 1.0 as possible, it is nice to see a realistic rating target from a major vendor. With aspects to the calculation such as the use of outside air, Cisco can only factor in average local temperatures, though they expect to be able to use outside air cooling at least 65% of the time. If Cisco is able to generate a better PUE after running the facility for an extended period, I’m certain they will make sure the media and their customers are aware of the improvement over the projected rating.

The data center is also one half of what Cisco describes as a metro Virtual Data center. It is paired with a datacenter in Richardson, TX to deliver IT cloud services that span the two facilities and offer the advantages of redundancy for increased uptime and disaster recovery planning.

I’m sure that Cisco will be making the most of the facility as a showcase for their Unified Computing infrastructure model, which will allow them to give potential customers a more one to one pitch when comparing their converged computing alternative to those offered by other vendors, or, more specifically, HP.