Cisco hopes switch can boost fortunes

Cisco Systems Inc plans to sell a network switch with the same features as server and storage systems, spurring competition with computer makers such as International Business Machines Corp.

Cisco, the top maker of networking equipment, will release the product in the second quarter, said Jayshree Ullal, a senior vice-president at the company. A typical configuration of the switch, called the Nexus 7000, will cost $250,000, she said.

The company plans to sell more equipment to data centers, hubs of computers that process information for the Web and corporate networks. That market will generate $10 billion in 2011, up 25 percent from last year, research firm IDC estimates.

The Nexus 7000's server functions let it rival systems from IBM and Hewlett-Packard Co, said Zeus Kerravala, an analyst with Yankee Group in Boston.

"They are moving into the realm of the computing vendors," Kerravala said. Switches typically just direct network traffic, while servers and storage systems hold the information and dish it out when needed. "There was very little overlap with HP and IBM before," he said.

Cisco, based in San Jose, California, fell 91 cents, or 3.6 percent, to $24.20 on Jan 25 in NASDAQ Stock Market trading. The shares were little changed last year.

The company gets as much as $2.5 billion, or 7.2 percent of annual revenue, from data-center switches and related products, according to Jeff Evenson, a Sanford C. Bernstein & Co analyst in New York. In the market for switches with storage functions, Cisco trails Brocade Communications Systems Inc.

About 500 engineers worked for four years on the new product, at a cost of $250 million, Cisco's Ullal said.

The switch can download Netflix Inc's catalog of 90,000 movies in 38.4 seconds, Cisco said.

"This is our biggest announcement in the past decade," Ullal said.

Agencies

(China Daily 01/29/2008 page17)