Down To Business: Cisco, Microsoft, And The Tiger Woods Effect - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Mobile // Mobile Applications
12:29 PM
Rob Preston
Rob Preston
Connect Directly

Down To Business: Cisco, Microsoft, And The Tiger Woods Effect

These still-dominant vendors aren't to be taken lightly, but competitors no longer show awe or fear.

Tiger Woods limped off the course last Thursday after shooting a six-over-par 42 on the first nine holes of The Players Championship, one of professional golf's most prestigious tournaments. Suffering a sore knee and other physical and psychological ailments, some self-inflicted, Woods, whose world ranking has dropped out of the top 10 after being at No. 1 for more than five years, looked lost. Back in the clubhouse, his competitors later expressed dutiful respect, bordering on pity, for their former chief nemesis. But there was no more awe, no more fear.

Cisco and Microsoft are struggling through their own Tiger Woods times. Once the undisputed leaders of their markets, they're now vulnerable to younger, more agile rivals, each looking to undercut their decades-old business models.

At Interop in Las Vegas last week, Cisco, which once dominated this networking-centric show, was the brunt of uncharacteristically strident attacks from competitors during keynote addresses and conference sessions, just days after Cisco reported soft financial results. Earlier this week, when I asked Alan Baratz, president of Avaya Global Communications Solutions and a former top Cisco exec, to size up his former employer, he wasn't shy: "They're vulnerable. They expanded into a lot of areas in a short period of time. They got distracted. And they alienated a lot of customers when they went into the data center, opening up opportunities for competitors to take advantage."

Cisco CEO John Chambers, in announcing that the company's third-quarter net income fell 17.6% from the year-earlier quarter on 4.8% higher revenue, was subdued in his assessment. "We have acknowledged our challenges," Chambers said in a statement, alluding to a leaked memo to employees in which he blamed operational execution rather than the company's strategy for its financial shortcomings. "We know what we have to do. We have a clear game plan."

That game plan entails shedding some peripheral product lines (the Flip videocam was the first to go, a couple of months ago) and shore up operations. But as my colleague Art Wittmann noted in a recent column, Cisco's challenges are more than operational. It faces ever more sophisticated competitors, especially as it looks to unite networking, servers, and storage into a single architecture.

The fat profit margins of Cisco's core router and switch businesses can't survive that competition. Already, sales are under pressure: While Cisco's switch and router revenues were flat to down through the first three quarters of its current fiscal year, HP's competing networking business has been growing steadily, up only 3.9% in its fiscal second quarter compared with the first quarter, as HP reported its own disappointing financial results last week, but up a whopping 118% compared with the second quarter of 2010--albeit on a much smaller base than Cisco's. As Art noted: "Its competitors are almost universally accustomed to living with smaller profit margins. And while it would be foolish to count Cisco out of any market it wants to compete in, it would be equally foolish to expect that Cisco will be able to maintain its historical growth and margins."

As for Microsoft, rivals are gunning hard for its cash cows.

Just as the application service provider is making a vigorous comeback in the form of software as a service, thin client computing is all the rage again, as Google (Chrome OS and Chromebooks), various tablet and smartphone makers; and even longtime thin client champions forward their own compelling Window-less visions. When I recently asked a group of leading CIOs whether reports of the demise of the PC are greatly exaggerated, I was surprised to hear they didn't think so.

Microsoft needs to pay attention, even if reports of the demise of Microsoft are greatly exaggerated. Its Office and Exchange franchises are also under pressure from the likes of Google Apps and the entire Web 2.0 movement.

Cisco and Microsoft--like Tiger Woods--aren't to be taken lightly. But there's blood in the water.

Rob Preston,
VP and Editor in Chief, InformationWeek
[email protected] twitterFollow Rob Preston and InformationWeek on Twitter:
@robpreston @InformationWeek @IWpremium To find out more about Rob Preston, please visit his page.

Vendors are fighting it out in the market for integrated network, computer, and storage systems. In the new all-digital issue of Network Computing, we go ringside to help you pick a winner. Download the issue now. (Free with registration.)

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

IT Leadership: 10 Ways to Unleash Enterprise Innovation
Lisa Morgan, Freelance Writer,  6/8/2021
Preparing for the Upcoming Quantum Computing Revolution
John Edwards, Technology Journalist & Author,  6/3/2021
How SolarWinds Changed Cybersecurity Leadership's Priorities
Jessica Davis, Senior Editor, Enterprise Apps,  5/26/2021
White Papers
Register for InformationWeek Newsletters
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
Flash Poll