The margins of network companies (Cisco, Juniper, HP, Sycamore) post 2008 has dropped significantly to 15-16% from 20% just about a year ago...
1. is it due to lack of any differentiations in their core business of routers and switches leading them on a race to the bottom for their margins?
2. are we seeing the climax of hype for cloud computing whereby the growth for more businesses buying new routers and switches will not materialize....
3. Imagine if cisco has to focus only on Brics for growth...we in brics know fully well there arent enough potential to grow beyond ther 10% theatre growth cisco estimates in their analyst briefing...what about their strategy of focusing on public sector investments....we have heard enough of fiscal deficits and govt. debt burden already...
4. We see Huawei and ZTE up and coming....should we be seeing chinese domination for the next decade in this core switches and routers business....
The only way for them to get back on the margin game it seems is through software and services (cisco services growing steadily to 20%+ of their revenue for FY'11). What would it make these players something like IBM? Maybe we need another lou Gestner to make this elephant dance...Lou made the mammoth dance with his services strategy...it seems we may see cisco going the IBM way....
What do you think?
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