Even before making a dent in sales, Cisco had a negative effect on the switchmakers that dominated the market before its arrival. McData Corp. (Nasdaq: MCDTA)
and
Brocade Communications Systems Inc. (Nasdaq: BRCD) lowered prices to its OEMs to keep Cisco from eating into their market share, and that was reflected in their bottom lines (see Did Brocade Blow an Opportunity? and McData Maudlin Over Price Pressure). McData CEO John Kelley has often identified Cisco, rather than Brocade, as his prime competition because Cicso has focused more on the director switch category where McData is the leader. Brocade remains the leader in the low-end and midrange markets (see Brocade & McData's Paths Diverge).
Chambers makes it clear he expects to emerge as a winner, identifying storage as a possible $1 billion market for Cisco (see Storage: A Cisco Billion Dollar Play). Brocade will announce its quarterly earnings on Feb. 11; McData, which laid off roughly 9 percent of its staff last week, will announce on Feb. 26 (see McData McDownsized).
Cisco reported net income of $1.3 billion or $0.18 earnings per share, beating First Call estimates by a penny and up from $1.2 billion and $0.17 a year ago. Its overall revenue for the quarter was $5.4 billion, up 14.5 percent from last year.
Unlike other storage execs on recent earnings calls who forecasted an uptick in spending for 2004, Chambers sounded cautious about the near future. He claimed the recovery's momentum is "still not as strong as we'd like." (See Storage Bigs Brash on Budgets and Cisco Stays Cautious).
Dave Raffo, Senior Editor, Byte and Switch
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