Photo: Associated Press
Cisco’s stock is in a free fall because John Chambers is pointing his fingers at the wrong problem.There’s a much bigger thing going on besides enterprises zipping up their wallets and fears of Europe.
Enterprises don’t want to buy network gear anymore.
They want put their apps into the cloud and move their spending from CAPEX — big capital equipment — to OPEX — monthly payments on operations.
“There’s a fundamental transformation happening and its upsetting the old guard,” a former Cisco executive told Business Insider. “Successful companies try to cannibalise themselves before someone else does it. But Cisco is king of the hill and defending its territory by offering incremental-ism.”
By incremental-ism, he means adding more features to products instead of coming up with whole new products and services.
Cisco has been working on reinventing itself for years. It’s had some success — with servers and security software. But it’s floundering in other areas, like collaboration software which includes services like WebEx and Jabber. Collaboration now represents 21% of Cisco’s revenue but year-over-year revenue was flat last quarter. Google still makes most of its money on network equipment like switches and routers.
Still, no one is counting Cisco out. It can transform itself. “Cisco has the breath of engineering and their competitors are weak. Juniper and HP are screwing up faster than Cisco is,” the former exec told us.
Cisco’s stock is down 10% to about $16.50 since Cisco posted its last quarterly earnings on Wednesday.