Cisco Systems, Inc. (NASDAQ:CSCO) reported its quarter earnings and met all the expectations from the street. Meanwhile, Facebook Inc (NASDAQ:FB) announced hours before Cisco Systems, Inc. (NASDAQ:CSCO)’s earnings that they will be building a new kind of computer network, and directly rival Cisco Systems, Inc. (NASDAQ:CSCO) in the network industry, which is Cisco’s home turf. A ‘Business Insider’ article discusses about Cisco Systems, Inc. (NASDAQ:CSCO) CEO John Chambers views on Facebook Inc (NASDAQ:FB) entering network industry.
Facebook Inc (NASDAQ:FB) and many other small startups are doing similar things by using equipment bought from vendors like Broadcom and open source software. All these companies claim that this way of building up the network is much more cost effective when compared to the traditional way, which is the Cisco’s way of doing things.
Many analysts and investors feel that Facebook Inc (NASDAQ:FB) entering the network industry might impact the Cisco Systems, Inc. (NASDAQ:CSCO) stock in the future. But Chambers feels that Facebook entering the industry might not impact them. He calls this effort from Facebook Inc (NASDAQ:FB) as “White Label” or ‘White Box”. He added that customers might not trust these efforts as they are not willing to take any risk. He feels that Cisco Systems, Inc. (NASDAQ:CSCO) might just crush these “white label” competition.
“We’re seeing no unusual competition, from white label or white box, nor will we in the future. […]This is where we’re just going to crush the white label. There’s got to be a security architecture approach. All it takes is one breach and you’ve done more damage to your brand as a company,” Chambers was quoted as saying.
Chambers also said that he is not expecting the gross margins to go down anytime soon. He feels that Cisco Systems, Inc. (NASDAQ:CSCO) getting into high profit zones like consulting and Internet of Things might just pump up their gross profit margins.
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