Cisco enjoys "blowout" quarter at HP's expense

Networking daddy's switch sales bounce back in Q3 as internal challenges take toll on closest rival HP

Cisco's internal reorganisation and increased aggression appear to be paying off following a rebound in its switching sales.

Since John Chambers' (pictured) extraordinary admission in April that the vendor had "lost credibility", the networking giant has trimmed headcount by 11,000 and divested certain non-core technologies.

According to market watcher Infonetics, Cisco enjoyed a "blowout quarter" in the Q3 switching market as its sales leapt by 18 per cent and market share by three points to 68 per cent.

To top it off, most of those gains came at the expense of HP, whose aggressive tactics had seen it eat into Cisco's share over the previous 12 months. Third-placed Juniper saw sales rise six per cent sequentially.

Matthias Machowinski, directing analyst for enterprise networks and video at Infonetics Research, said: "Rejuvenated competition in the Ethernet switching market has taken its toll on Cisco over the past year, but in 3Q11, Cisco turned things around with a blowout quarter, showing that its internal reorganisation and more aggressive stance are starting to pay off."

Machowinski said HP had had to battle against a "myriad of well-publicised challenges".

On a related note, HP yesterday announced it had increased the margins available to networking partners under an initiative launched in the US, Canada and Latin America. This means the margins on offer are as much as double those offered by competitors, HP claimed – although the programme does not apply to EMEA.

The overall Ethernet switch market rose 13 per cent in Q3 sequentially to $5bn (£3.2bn) following a relatively weak first half, Infonetics said.

Average selling prices are 20 per cent down on last year following a Cisco-HP price war, but vendors are now holding the line on discounting, the analyst added.

The highest growth was in 10G ports – 21 per cent quarter on quarter – while the long-awaited 40G market finally emerged during the quarter, posting revenue of $6.5m.