Cisco Systems today announced that its earnings for the quarter ended July 25 slumped 46 percent, to $1.1 billion from $2.01 billion a year ago. Revenue dropped to $8.5 billion from $10.4 billion. But Cisco CEO John Chambers said that things are looking up, and promised to return the company to double-digit growth.
The worst part, however, has been a decline in the company’s core business: switches. The Wall Street Journal reports that sales for Internet switches declined 11 percent to $12 billion its its fiscal year — primarily due to competition from rivals such as Hewlett-Packard. Check out this little tidbit from this great Journal story on Cisco:
In addition to the recession, Cisco faced increased competition from rival Hewlett-Packard Co. The company’s new management structure has at times slowed its response to rivals’ moves, according to people familiar with the matter. In late 2007, for instance, H-P started promoting a warranty for its switches that provides free upgrades and support. Under Cisco’s new structure, a decision about how to respond to H-P’s offering was delayed as it worked its way through multiple committees, these people said. Cisco didn’t match H-P’s promotion until this April, and during that period Cisco’s market share fell.
HP is not going to roll over– it is one of the few companies to have the resources and a similar comm-puting (communications-based computing) view of the IT landscape as Cisco. (Related: How HP Can Fight Cisco and Win.) With further competition from lower-cost competitors such as Dell and some low-cost Asian manufacturers, Cisco is running the risk of seeing its market share erode further. But then you can’t own the market forever.