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HP, weighing in at $126 billion, has waged the most public war on Cisco's core networking products, singling out Cisco's high networking product margins as out of line. HP is even claiming a 40 percent price advantage over Cisco on core networking products.
That strategy appears to be paying off for HP. In the most recent quarter, HP said its enterprise switching and routing revenue grew 30 percent year over year.
Cisco's switching sales, meanwhile, in the most recent quarter were down four percent compared with the year ago quarter, while routing revenue was up four percent.
When asked by CRN if his comments were directed at HP, Lloyd said: "No. It is directed towards all of those that would choose to commoditize the network."
Lloyd, a one time solution provider, gave an example from his own professional life of the devastation that accompanies commoditization of a market.
As a 24-year old entrepreneur running his own VAR business, Lloyd recalled selling IBM PCs at 41 percent gross margins. "Man, was that fun," he said.
That is until Dell drove into the market with its direct sales model, driving down PC margins. "Along came this really smart Texan named Michael Dell and he said, 'The party is over, everyone'," recalled Lloyd. "Dell said, 'We are going to remove from you the value that you established in your VAR business ... We are going to do all the stuff that you built a business model on, and we are going to drive the price down. And it wasn't so much fun anymore."
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