Cisco making mark in high-end router space

Sales of its biggest router are growing and a presence is being carved out in the telco carrier sector, says CEO John Chambers

Cisco Systems says it has turned the corner in getting service providers to adopt its biggest router.

Revenue from the CRS-1 (Carrier Routing System-1), the company’s massive system for the core of carrier networks, was about US$80 million (NZ$126 million) in Cisco’s fiscal fourth quarter, chief executive John Chambers says. That figure is double the revenue from a year earlier. Meanwhile, Cisco received more than US$100 million worth of orders for the product in the quarter, up more than 200% from a year earlier.

The CRS-1’s numbers make up a small part of the whole financial picture at Cisco, which reported revenue of US$7.98 billion in the last quarter. But as its flagship product, the huge router is important to Cisco’s image, as well as being a key weapon in its fight against rival Juniper Networks and the leading edge of a new software architecture destined for other Cisco products.

CRS-1, unveiled in mid-2004, succeeded the Cisco 12,000 Series platform as the company’s biggest router. It can be equipped for a total capacity as great as 92Tbit/s and has modular software called IOS (Internetwork Operating System) XR that is different from the IOS on most other Cisco gear. IOS XR is gradually trickling down to smaller Cisco products.

It’s been a long trip, but products as big as CRS-1 typically sell in relatively small numbers and have to go through long evaluations by the carriers. It has also taken time for Cisco to develop a full set of features in the new software, analysts say.

“It’s a very complex product that’s still in its infancy,” says Frank Dzubeck, president of consultancy Communications Network Architects.

But the recent growth Cisco has reported also reflects the recovery of a telecommunications business that has gone from a bewildering bandwidth glut in the early 2000s to fast-growing demand.

“Video is becoming a killer app that really does require bandwidth,” says Burton Group analyst Dave Passmore. New fibre-to-the-home networks, faster cable modem connections and 3G mobile systems are also increasing the need for capacity at the core of networks.

The pre-emptive multitasking architecture and modular software of the CRS-1 has helped Cisco technology to catch up with Juniper, its rival in carrier routers, analysts say. Juniper’s market share grew from 30% in 2002 to 37% in 2004 as Cisco’s fell from 63% to 59%, according to Shin Umeda of Dell’Oro Group. Since then, the market-share gap between the two companies has remained fairly stable, he says.

However, about two-thirds of Cisco’s revenue from this class of routers still comes from the 12,000 series, reflecting its big installed base, Umeda says. The battle for the top-end router deployments continues as many carriers plan out their next-generation architectures amid the growth in traffic.

Cisco has been an outsider to tele-communications, with most of its sales being to end-users, and had a hard time breaking in to carrier accounts. However, Chambers says carriers are starting to view Cisco as a business partner. That change reflects the fact that Cisco’s IP vision of networking is finally starting to supplant the traditional telephone networks as Cisco predicted in the 1990s, according to Passmore.

“Cisco firmly aligned itself with the ISPs and made enemies of all the traditional telcos,” Passmore says. “The telcos finally did see the light and realised the future was IP.”

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