Jon Snyder, who helps run the computer network at Portland State University, knows he could save the Oregon school as much as US$75,000 by not shopping at Cisco Systems Inc for equipment he'll buy this year.
Hewlett-Packard Co, Foundry Networks Inc and Extreme Networks Inc charge less for similar products. Still, Snyder says he plans to spend US$100,000 to US$250,000 at Cisco, the biggest maker of networking gear, because he prefers the company's equipment and customer service.
"You get what you pay for," says Snyder. "One outage caused by a software bug that Cisco wouldn't have is worth the price difference."
Banking on that kind of brand loyalty, Cisco Chief Executive John Chambers has stuck with prices that are often 50 percent higher than what competitors charge. So, even as industrywide sales of network equipment fell to a four-year low last year, Cisco increased its gross margin in every quarter and boosted it to a company record 69.3 percent in the period ended Oct. 26.
And Chambers' strategy is still paying off. Later today, San Jose, California-based Cisco probably will say profit rose in its fiscal second quarter as sales dropped. A year earlier, the gross margin, or percentage of sales left after subtracting production costs, was 62 percent.
Cisco is expected to report profit of US$0.13 a share, excluding some expenses such as acquisition costs, up from 9 cents a year earlier, the average estimate in a Thomson First Call survey of analysts. Sales probably fell 1.7 percent to US$4.73 billion, according to First Call.
"They own the market and they can still afford to charge the premium for the nameplate," said Terrence Gerlich, who manages US$500 million at Freedom Capital Management LLC. Freedom held 423,090 Cisco shares as of Sept. 30.
Cisco had a 69 percent share of network-switch revenue in the third quarter, according to market researcher Dell'Oro Group.
Foundry's gross margin also rose every quarter last year, though fell short of Cisco's, ending last year at 54.7 percent.
Extreme's fell to 50.2 percent in its fiscal second quarter from 52.8 percent a year earlier, and the company's loss more than doubled to US$184 million for the year ended in June.
"Cisco still believes that price is still not the key issue in the marketplace," spokeswoman Abby Smith said.
Some customers disagree.
Last year, Bruce Arsenault of Connecticut's Naugatuck Valley Community College replaced Cisco equipment with 28 data switches from Hewlett-Packard. He says changing saved the school more than $80,000, or at least 40 percent over what Cisco would have charged.
As Hewlett-Packard and Dell Computer Corp expand into Cisco's markets and the sluggish US economy forces some customers to look for bargains, Chambers may have trouble.
"You're not going to be able to get the margins you had before," says Gerlich. "You're not going to get people to buy just because they're Cisco."
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
CONCERNS: Tech companies investing in AI businesses that purchase their products have raised questions among investors that they are artificially propping up demand Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday said that the company would be participating in OpenAI’s latest funding round, describing it as potentially “the largest investment we’ve ever made.” “We will invest a great deal of money,” Huang told reporters while visiting Taipei. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.” Huang did not say exactly how much Nvidia might contribute, but described the investment as “huge.” “Let Sam announce how much he’s going to raise — it’s for him to decide,” Huang said, referring to OpenAI
CHIP HANG-UP: Surging memorychip prices would deal a blow to smartphone sales this year, potentially hindering one of MediaTek’s biggest sources of revenue MediaTek Inc (聯發科), the world’s biggest smartphone chip designer, yesterday said its new artificial intelligence (AI) chips used in data centers are to account for 20 percent of its total revenue next year, as cloud service providers race to deploy AI infrastructure to meet voracious demand. MediaTek is believed to be developing tensor processing units for Google, which are used in AI applications. While it did not confirm such reports, MediaTek said its new application-specific IC (ASIC) business would be a new growth engine for the company. It again hiked its forecast for the addressable ASIC market to US$70 billion by 2028, compared
Motorists ride past a mural along a street in Varanasi, India, yesterday.
RSS