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Cisco's edge router market share has dropped a stunning -36%
Thu, 2/17/11 - 8:49am    View comments

Early this morning TheStreet.com revealed in the below video that Cisco lost a -9% share in the service provider edge router market during Q4'CY10.

Revealingly, it was Alcatel-Lucent that gained an +8% share in the service provider edge router market during Q4'CY10.

That means over the past 5-years, Cisco's service provider edge router market share has dropped a stunning -36%:

58% - 37% = 21%

21% divided by 58% = 36.2%

Alarmingly, the video above also revealed that Cisco lost a -5% share during Q4'CY10 in the high-end core router market while simultaneously Juniper gained a +5% share in the high-end core router market.

Last month I blogged that the highly touted Cisco CRS-3 router appears to have caused "network outages" at both Comcast and AT&T.

Cisco's Q2'FY11 router sales sequentially declined by -$132 million.

Tellingly, Cisco's Q2'FY11 router sales are down a whopping -$297 million from Cisco's Q2'FY08 router sales (see page 26).

Cisco's router sales (declines highlighted in yellow)

However most troubling in my opinion, is the following statement made by Cisco CEO John Chambers during Cisco's Q2'FY11 earnings call:

"Routing grew 4% year-over-year from a revenue perspective led by the high-end routing."

Then Cisco CFO Frank Calderoni stated:

"Routing revenue was $1.7 billion, up 4% year-over-year primarily driven by a 5% and 6% increase in high end and low end respectively."

Interestingly, Tal Liani of Bank of America/Merrill Lynch asked John Chambers the following question:

"Routing is up 5% which is materially below the competition.

"Specifically to routing, why do we see such decline, sequential declines, and low year-over-year growth in routing given that you don't have many competitors and there shouldn't be any pricing pressure in this segment?"

Chambers response:

"In terms of routing, we're doing very well and we do have good competitors. But you are right, our product portfolio is the strongest it's ever been in core, Edge, and access. I think what you're seeing in the quarter is you have good CRS-1 growth but the CRS-3 hasn't kicked in, in large volumes yet because what's going to occur there is you've got to get to the testing cycles with the large accounts. So I would expect you to see that over the next several quarters as that picks up."

Chambers continued:

"In terms of the Edge, I really like our product capabilities and we did very well this quarter in terms of Edge orders. Now we've got to keep the pressure on in terms of converting those to revenue and then expanding off the initial capabilities and the direction. So if you look at it, I think in both these categories you look back a year from I think we'll hold our own very well and we'll see if that means slightly upwards with market share or slightly down. But I feel good about our overall products, Tal, in the direction."

Finally, the very last question during the Cisco Q2'FY11 earnings call was asked by Simon Leopold of Morgan Keegan & Company, Inc:

"John, during the course of the call, you mentioned market share a number of times spread out for the call. I'm hoping you could kind of go back and simply address maybe the gap between perception and reality and just clarify.

"And in general, what are you doing in terms of the real fundamental aspects around market share. If you could summarize that."

Chambers response:

"On service provider routing, although we might lose something on the edge for a period of time this quarter. I really like where we are. And with ASR 9000, ASR 5000, we're going to be fine in terms of service providing the edge in terms of the direction and service provider routing in total. And [indiscernible] begin to kick up and not expect that throughout the remainder of this year in terms of direction."

In my personal opinion, John Chambers has absolutely no credibility left!

What's your take, does Cisco CEO John Chambers have any credibility left?

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