Cisco Systems buoyed the market, and our spirits, once again with some happy talk from its annual worldwide analyst conference in San Jose last week.
Orders for November are meeting expectations, company officials say, and business is stabilizing, even growing. Cisco's usual gushing optimism has been tempered somewhat following the telecom crash, but the company is conservatively optimistic at any rate.
These happy holiday greetings from Cisco, as well as anticipation for the end of a dreadful year, helped the Dow break 10,000 and the NASDAQ 2,000 last week. But Cisco specifically still has some challenges ahead, particularly in the service provider market.
Despite being in the catbird's seat with the migration from circuit-to-packet telephony, Cisco is missing much of the current action in softswitches. Nortel landed that huge US$1.1 billion deal with Sprint and claims to have landed $2 billion in voice-over-IP wins to date.
Other softswitch deals have been going to Sonus, Telica and seemingly everyone but Cisco. Cisco's efforts to ally with one or more of the "NELAS" - Nortel, Ericsson, Lucent, Alcatel, Siemens - to develop and market a Class 4/5 switch replacement have been unsuccessful, Cisco Chief Marketing Officer James Richardson acknowledged at a telecom conference in New York last month.
But Cisco believes it doesn't have to partner to be successful in the softswitch market, Richardson said. Analysts expect Cisco to make an acquisition in the softswitch arena next year to buck up its presence here, one of eight to 12 purchases the company is expected to make in 2002.
Long-haul optical switching and transport is another area that's "very challenging" for the company, Richardson said at that same New York conference. Despite last week's introduction of a new long-haul and extended long-haul transport system - the 80-channel ONS 15808 - Cisco is still back in the pack of dense wave division multiplexer vendors, according to Dell'Oro Group.
And Cisco is still missing the optical switching piece it needs for an end-to-end story. The company still hasn't filled this vacancy since canning the 15900 Wavelength Router earlier this year.
Lastly, Cisco has to penetrate the regional Bell operating company and incumbent local exchange carrier (ILEC) ranks despite a further downturn in capital expenditures expected for 2002. The company has been successful with competitive local exchange carriers, ISPs and IXCs, but less so with RBOCs and ILECs.
What may help the company here, according to UBS Warburg, is that RBOCs are expected to issue metro optical requests for proposals next year, with the prize being Verizon. Cisco, which has had some success with its ONS 15454 SONET mux, can step up and potentially replace Fujitsu in the Verizon network, Warburg says.
Cisco has also been investing heavily in OSSes, which could raise the company's profile among the operational staff within RBOCs and ILECs. Indeed, targeting the operational side of the carrier appears to be key to Cisco's strategy of selling to service providers going forward. The company, for instance, emphasized the operational ease of making the transition from ATM to Multi-protocol Label Switching with its upcoming MGX 8950 multiservice switch.