| BUSINESSWEEK ONLINE : NOVEMBER 6, 2000 ISSUE | ||||||||
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| INFORMATION TECHNOLOGY
Where the Trouble Is The networking giant is showing some unusual signs of weakness, especially in the router market, the gear that directs traffic on the Internet. LOSING ITS LOCK ON ROUTERS Cisco controls over 80% of the $3 billion market for routers used in corporate networks. But it's losing ground in high-end routers, largely used by phone companies. Its share of that $2 billion market fell to 75% last quarter from 80% in the previous one. FAR BEHIND IN OPTICS Cisco has a measly 3% share of the fast-growing, $25 billion optical market. It is filling out its product line through acquisitions and should top revenues of $1 billion in optics this fiscal year, up from zilch two years ago. WEAKER STOCK Cisco's stock is down 38% from its peak in March, making it harder to retain employees and to make acquisitions. And Cisco has to pony up more shares of stock to make acquisitions than in the past, which dilutes the equity stakes of existing shareholders. GROWING BUREAUCRACY Cisco has been superbly managed, with operating margins that averaged 24.9% over the past five years, compared with 4.9% for Nortel and 5.3% for Lucent. But Cisco's workforce has doubled in the past year, to 35,000 employees, making it tough to act fast in a changing technology landscape. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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