Does Cisco Hike Prices After Buys?

SAN JOSE, CALIF. (06/29/2000) - Cisco Systems Inc. is not the only one that pays when it acquires a company. Customers apparently do, too.

Users on a Cisco news group on the Internet say that ArrowPoint Communications Inc. representatives were urging them to purchase more of the company's Web switches before Cisco completed its $5.7 billion purchase of ArrowPoint on June 23. On or after that date, Cisco would hike the price of the switches by 20%, they say.

"We are looking at buying a couple of ArrowPoint CS-150 switches, and the rep is telling us that Cisco always raises the prices on the products they acquire," stated Ben Klausner, operations manager at a business-to-business e-commerce start-up in Redmond, Washington, in a posting on the Cisco news group. "After Thursday [June 22] we should expect a 20% price hike."

Another user responded, "I recently spoke with an ArrowPoint rep and he said the same thing. It's most likely true, but it appears they are using that as a selling point to get more units out quickly. If you're going to get one anyway, buy it now before Cisco raises the price. They're expensive enough, already!"

It is Network World's policy not to quote users by name and/or affiliation without permission, if quotes are gathered from Internet news groups, chat rooms or the like.

The Cisco/ArrowPoint Web switches range from $14,000 for the low-end CS-50 - which Cisco now calls the 11050 Content Service Switch - to $30,000 for the CS-800, or 11800, according to information on the ArrowPoint Web site. A 20% increase in the price would range from an additional $2,800 to $6,000. This week, Cisco also announced new software for the switches that could cost some users an additional $8,000 to $20,000.

"Cisco does not hike prices," a Cisco spokeswoman says in response to the news group postings. "On the contrary, our price-performance follows a Moore's law curve. Adjustments are sometimes made to price lists, discount schedules, currency conversions, and so forth during an acquisition, as part of integrating with Cisco's standard policies and procedures. But the end result is no change in the street price. And we do not have a practice of forward-announcing price moves."

Asked specifically if Cisco "adjusted" the list price of the ArrowPoint switches upwards by 20% on or after June 23, the spokeswoman replied: "Cisco adjusted the list price of some products, while the prices of other products remained the same. The entire product line was evaluated and based on a number of factors, some prices were altered on an as needed basis. We did not systematically raise prices by a set percentage."

The spokeswoman said the latest prices for the ArrowPoint switches have not been published yet.

The news group users, meanwhile, wondered if ArrowPoint reps were just trying to close some last minute sales and commissions before Cisco took over.

"Is this guy blowing smoke to try to close on a commission before the names change, or does Cisco really have a history of raising prices after it buys a company?" Klausner asked.

"It seems to me that they are trying to push some last minute sales before Cisco takes over," stated another in response.

"We were looking at buying two of the CS-50 units. Our rep told us that if we ordered by this past Tuesday that they would waive the installation charge and give us a significant discount. He said that they expected the acquisition to be completed by Friday and wanted to get the sale completed before then," he stated.

The Cisco spokeswoman did not reply when asked if ArrowPoint reps were using the price hike claim as a ploy to close sales before Cisco completed its acquisition of ArrowPoint.

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