ProCurve Price Matching 'Very Non-Cisco'

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Cisco Systems has no more to say about allegations that it's urging VARs to whittle down prices on its networking gear in a bid to better compete with Hewlett-Packard's ProCurve Networking division.

While Cisco has denied that a price war with ProCurve is in place, the vendor said this week it will not discuss the allegations further, instead highlighting a blog post by Wendy Bahr, Cisco's senior vice president of U.S. and Canada channels, outlining its competitive position. Bahr's blog post neither denies nor confirms that Cisco has a price-matching initiative against ProCurve under way.

As Cisco continues to refuse to comment on the alleged price war, VARs and industry analysts say that price matching may be occurring on a case-by-case basis rather than be part of a sweeping mandate.

"I don't doubt that on specific deals they get down to skinny margins when they have to," said Don Wisdom, president of Datalink Networks, a Santa Clarita, Calif.-based solution provider. "It's one thing to do one-offs and treat individual deals and discounts pretty deep," but a channelwide initiative to match ProCurve pricing seems unrealistic, Wisdom said.

Mark Hilz, president and COO of INX, a Lewisville, Texas-based solution provider, said he has not been told to match HP pricing, but added that Cisco has gotten more aggressive on pricing and value in response to HP ProCurve gaining more visibility in the market.

"They are willing to get aggressive and not let HP have any more market share," Hilz said. Cisco is more likely to offer aggressive pricing on deals where enterprises and certain verticals are under tight budgetary pressure and are extremely price-conscious, he said. Hilz said in some cases that has resulted in price matching to thwart HP from gaining market share, but those cases are few and far between.

Hilz said that the message he hears from Cisco is that it is "not going to lose any more market share to HP. The company is "going to stop HP in their tracks trying to make market share."

UBS Securities analyst Nikos Theodosopoulos said it would be "out of character" for Cisco to slash prices across the board, but that the vendor could be dropping its prices to edge out ProCurve on specific deals.

"I think Cisco, in select deals, is doing something to better compete with ProCurve on their lifetime warranty and pricing," he said, adding that it's a "case-by-case, select deals situation." Theodosopoulos also said that "it's very non-Cisco to just go and match HP's pricing across the board."

Switching is such a large part of Cisco's revenue that lowering its switching prices by 20 percent to 40 percent to match ProCurve's is "hard to imagine," he said. Instead, he said, Cisco is using rebates on bundled solution sales with VARs to stimulate the channel and offer competitive pricing models through value incentives. Those solution plays will offer increased rebates, better financial terms and new warranty options to lower overall pricing.

Next: VARs: Cisco Focusing On Value, Not Price

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