Why Can't Cisco Get Some Buzz?
03/11/2010 12:00 am EST
Cisco Systems (Nasdaq: CSCO) rules the technology that runs the Internet, but it’s got a few things to learn about product announcements.
On March 9, the company held a teleconference staged with all the hoopla of Apple’s (Nasdaq: AAPL) announcement of a new iPhone. But then Cisco unveiled a new core carrier routing platform with the catchy name of CRS-3.
The stock actually dropped 26 cents a share the day after the teleconference.
I can understand investors’ disappointment. The CRS-3 isn’t an iPhone-like consumer product.
But the CRS-3 is still huge news. This could well be the core platform for the next video-and-data-heavy version of the Internet. The CRS-3, an upgrade to the six-year-old CRS-1, offers three times the performance of the earlier platform at about the same price (and 12 times the performance of any current competing core router).
The new platform can handle 322 Terabits of data, video, whatever, per second. AT&T (NYSE: T), which took a turn at the teleconference, has tested it in the world’s first 100-Gigabit Internet backbone network between New Orleans and Miami.
Cisco has argued that the next version of the Internet will need the capacity to deliver video on demand, transmit high-speed data, and enable real-time teleconferencing at hundreds of times today’s volume and hundreds of times today’s speed. The CRS-3, which Cisco says took $1.6 billion to develop, is the company’s bid to own that future.
The CRS-3 won’t show up on Cisco’s top or bottom line soon—it is scheduled to start shipping in the third quarter of calendar 2010—but I think it does assure Cisco’s continued dominance of the Internet equipment sector.
As of March 11, I’m leaving my target price for Cisco at $29 by June 2010. It traded below $26 Thursday afternoon. (For my take on the stock market in general for 2010, read this post.)
Full disclosure: I own shares of Cisco Systems in my personal portfolio.