HP Touts Share Gains In Networking War With Cisco

Hewlett-Packard is touting first-quarter market share gains against rival Cisco Systems, even as a leading market researcher warns it is simply too early to tell just what kind of impact HP's networking business is having on Cisco.

With Cisco Live, the networking leader's premier end-user technology event kicking off in Las Vegas on July 10, HP issued a press release Monday pointing to market share gains across all networking segments, including network switching/routers, in every region of the world in the first calendar quarter of 2011.

Citing a a recently issued report by Dell’Oro Group, a Redwood City, Calif.-based market research firm, HP said it gained 2.5 percentage points worldwide for Layer 2/Layer 3 Ethernet switching revenue market share in the first quarter of 2011, while Cisco’s share fell 5.8 points in the same period.

HP also pointed to a 2.5 percentage point gain in routers and 2.2 points in WLAN revenue market share over the same period, while Cisco’s share declined by 3.1 points in routers and 0.4 points in WLAN, according to the Dell'Oro Group numbers.

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Alan Weckel, a director at Dell'Oro Group, verified the HP share gains, but cautioned that the networking market share results need to be examined over a three-year period from 2009 through the end of 2011 given "abnormal" Q1 2010 numbers. In fact, he said in an interview with CRN, the quarterly 2011 numbers could be misleading, favoring HP, given an "abnormal" increase in sales in the first quarter 2010.

"Q1 2010 was a bad year for corollary results," Weckel said. "It remains to be seen just what gains are being made. We don't know what is going to happen in 2011. We have to look at all of 2011, 2010 and 2009 and then see who has really gained share and lost share. Because of the economic crises, 2010 was abnormally high and 2011 is a year of normalizing or catching up."

"You really have to be careful looking at anything on a quarter to quarter basis," continued Weckel. "You have to look at it longer term to get a sense of what is happening. You have to look at what is happening regionally and in the data center."

NEXT: Cisco Addresses The Market Share Issue

"Long term, Cisco has done a fairly good job," said Weckel. "Looking forward, the market is changing quickly in areas that Cisco is strong in and areas that Cisco is not quite as dominant in. The data center favors Cisco and the emerging markets don't favor Cisco."

Rob Soderbery, senior vice president and general manager of Cisco's Unified Access Business unit, said there is a "misconception" that Cisco is losing networking market share. "Historically, Cisco has maintained port market share of 50 percent and revenue market share at a 70 percent level," he said. "That is a multi-year trend. There is a lot of talk about what competitors are doing or not doing. But if you look at the last eight or nine quarters, it may wiggle a bit, but fundamentally, Cisco has held serve at 50 percent port share and 70 percent revenue market share."

Cisco, in fact, is doubling down on its investment in partners as it sharpens its focus on its core network switching/routing business. Rob Lloyd, executive vice president, worldwide operations at Cisco, told CRN in an exclusive interview earlier this month that the company is stepping up its investment in the channel with the rollout of a simplified partner-led sales model aimed at enabling the networking leader to respond more quickly in the sales trenches to fend off competitors.

HP networking market share gains are inevitable given the dominant market share position of Cisco and the astronomical resources HP with $120 billion in sales, three times the size of Cisco, is bringing to bear in the networking market, said Bob Venero, CEO of Future Tech, a Holbrook, New York solution provider.

"HP is making a run at Cisco," he said. "They are going to take some market share. When you have the marketing engine of HP, the number of partners HP has and the dollars and cents HP is throwing at this market, you are going to take some share. Is HP going to take 50 percent market share? That's highly unlikely given the installed base that Cisco has in this market."

At Future Tech itself, HP is winning about 5 percent market share, primarily in small businesses looking to avoid Cisco's annual SmartNet maintenance fee, said Venero. "In an economy where people are trying to squeeze every dollar out of their organization, Cisco's SmartNet maintenance is a reoccurring bill that you avoid if you buy HP Networking," he said.

Ultimately, the networking war between HP and Cisco will benefit customers and partners, said Venero. "When you have two organizations looking for share, what happens is they get more competitive and reduce prices," he said. "Both customers and partners can take advantage of the competition between the two organizations."

One challenge both companies face equally, said Venero, is the channel conflict that inevitably takes place in the sales trenches. "You are going to fight HP direct and you are going to fight Cisco direct in some cases," he said. "There are always going to be those challenges."