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Cisco Systems' (Nasdaq: CSCO) new ASR-9000 edge router promises faster delivery of all that rich Internet media destined for personal computers and mobile devices. The US$80,000 question for potential customers: Will it prove to be too rich during challenging economic times?
The company's new piece of telecommunications equipment -- introduced Tuesday after four years and $200 million in the making -- comes with a promise and a prediction. Cisco says it will give potential customers like cable and mobile phone companies and Internet service providers six times the capacity of products from competitors. The company says it will be desperately needed because the rapid explosion of data and movies distributed on the Web will mean a doubling of Internet traffic by 2010 and again by 2012.
Edge routers will play a crucial role in determining whether that future consumer experience will be a pleasant one, or simply another excuse to keep your cable company's customer service division on speed-dial. Unlike core routers, which send data packets along within a network, edge routers are the traffic cops for data that travels between local area networks (LANs). They sit on the boundaries, or edges, of service areas and are that much closer to the actual users. They are expected to handle a lot of the diverse media now heading to homes and cell phones.
A Rich Investment, or Simply Too Rich?
Competitors like Juniper Networks (Nasdaq: JNPR) and Redback Networks will no doubt point to an $80,000 price tag as too high for companies who are now weighing the cost of infrastructure upgrades as they watch their stock price decline.
Cisco's answer is a mix of economics and technical finesse. "The ASR 9000 and the services it enables help service providers reduce their operating expenses while maximizing the efficiency of their capital expenditures," Kevin Petschow, Cisco global technology public relations spokesperson, told TechNewsWorld. "By increasing the scale and density of their carrier Ethernet platforms, service providers can offer more services with superior customer experiences while losing less power and space in their facilities." Petschow also says the new router also provides enhanced monitoring services to check for problems; no need to call out a customer service truck, which would save on worker productivity and fuel.
Cisco believes it can sell its ASR 9000 no matter what stage of network buildout a service provider happens to be in right now -- a large network in the process of loading up with new services, an existing first-generation network ready to move to the next level, or a company that's slowing down spending until profits can catch up. "Regardless of which stage these companies are in, we think we are in a very good position to capture a larger percentage of their total spend," Petschow said.
The Need for Router Speed
"Cisco's been on a mission of sorts for the last couple of years -- to communicate the fact that innovative, intelligently designed network solutions can do a lot to ease the flow of data from one location to another," Charles King, principal analyst at Pund-IT told TechNewsWorld. "I think the ASR 9000 fits into that strategy."
The results of faster edge routers will first be seen in homes rather than on mobile devices, King said, since the latter are just now seeing 3G network development by carriers. The current trend toward using set-top boxes and gaming devices like Xbox 360s as Web distribution platforms for high-definition movies will immediately necessitate more robust equipment, he said.
Who knows, maybe an ASR 9000 could help Comcast (Nasdaq: CMCSK) with its widely-publicized bandwidth-management issues that got the attention of the FCC earlier this year. "To me, at least, the arguments that you had to have restrictions on bandwidth consumption had more to do with them (Comcast) trying to put the screws on competitors, but with a product like this in their data centers, that might mitigate excuses as far as bandwidth allocation goes."
Does King think that companies will invest in a cutting-edge edge router during a recession? It may not matter that much to Cisco's bottom line, since it is has a diverse group of business products and customers. Still, "while some of those companies are going to look at this and say, 'We couldn't possibly afford that,' others will say, 'We'll get this into the data center and when consumer spending does start to pick up, we'll be ready for consumers who want high-quality media to be delivered to their homes or handsets,'" King said.
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