Cisco scored a major win against hated rival Arista, and has 'shown no interest in settling'

Arista CEO Jayshree UllalAristaArista CEO Jayshree Ullal

Arista Networks CEO sent a reassuring email on Monday to the company’s customers after Arista suffered a devastating, but not unexpected, loss in its battle with rival Cisco.

Cisco both sued Arista and took the battle to The International Trade Commission. The ITC ruled in Cisco’s favour on Friday, saying that Arista was violating three of Cisco’s patents and that Arista’s products would be banned from entering the United States after a 60-day grace period. During that 60 days, the ITC president can review and overturn the finding. That rarely happens.

However, Cisco first sued Arista in December 2014. so Arista has had time to alter its products to get rid of the disputed technology. Arista says its current products, shipping since May, have already been changed.

That means that Arista is hoping that any ITC exclusion order will be short-lived. Still, if the ban takes effect, it could still take 4 to 6 months to get it lifted, Nomura Wall Street analyst Jeffrey Kvaal warns.

So Arista has been stocking up on its products in the US and Ullal found a US manufacturer to build the revised product locally, too, Ullal told customers.

Arista is a hated rival of Cisco, primarily because many of Arista’s leaders and engineers are former Cisco employees, including Arista cofounder Andy Bechtolsheim and CEO Ullal.

Arista competes with Cisco in the very important data center network equipment market. Facebook is, for example, an Arista customer, although Facebook has also built its own network switch, too.

Cisco insists that Arista is using technology invented when its founders, leaders, and employees worked at Cisco and it wants Arista to stop using that technology. Arista disputes that.

Normally these kinds of lawsuits are settled out of court and life goes on.

We understand from a person in contact with both Cisco and Arista that after the lawsuit hit, Ullal reached out to Cisco to negotiate a settlement and was rejected. This person believes Cisco really wants to distract Arista with expensive legal matters for as long as it can.

Ullal wouldn’t comment on her attempt to settle. But a source close to the company tells us, “Cisco has expressed no interest in settling.”

And Arista’s lawyers have been implying the same at every possible opportunity.

In the company’s latest press release, Arista’s lawyer Marc Taxay did so again, saying, “Despite Cisco’s rhetoric claiming that the lawsuits are a defensive move to protect its intellectual property, these actions are clearly part of a broader effort to use litigation to preserve Cisco’s market position.”

So far, the tactic hasn’t been working. Arista continues to report significant revenue growth (34% in the last quarter) and better-than-expected profits and has pretty much no debt.

But if it can’t sell its old products for longer than it planned, and Cisco won’t settle, that’s obviously not a good thing and investors know it. A few months before the lawsuit, in September, 2014, the stock was trading above $90. Today it’s closer to $60.

NOW WATCH: MICHAEL MOORE: ‘I think there’s an excellent chance’ Trump will be president

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.