Are Cisco Switches Overpriced?

Phil Hochmuth of Network World examines the eternal question of whether Cisco Systems’ switching gear is significantly more expensive than that of its competitors. The widespread industry assumption is that Cisco equipment is priced high, if not overpriced.

Hochmuth did some investigating and discovered the following:

But comparing overall LAN switch port prices — based on figures from Synergy Research Group — Cisco is not that much more costly than some of its high-performance competitors. On a price-per-port basis, it’s not even the most expensive. Force10 Networks, at $513 per port, is the priciest switch vendor; more than half of Force10’s revenue is from 10G Ethernet switch port sales. The second-most expensive switches per port are from Foundry at $162 per port. Cisco is third at $124 per port, followed by Extreme at $113. Enterasys, Alcatel and Nortel cost $89, $88 and $80 per port. The cheapest brands are Netgear ($4), D-Link ($5) and Cisco’s Linksys ($6).

Force10 probably should not have been included in the sample, since, as Hochmuth concedes, it derives a large share of its revenue from 10G Ethernet sales, which understandably cost more than 10/100/1000-Mbps switches. If you remove Force10 from consideration, Cisco is second only to Foundry on the price charts, and Foundry’s product mix is skewed toward high-end applications in the network backbone and data center.

When one takes those factors into analysis, it’s reasonable to wonder whether Cisco’s wiring-closet switches might be overpriced. As if reading our minds, Hochmuth notes the following:

While Cisco may be associated with high-end products and price, its lower-end gear is among the most expensive. If you’re in the market for a fixed-configuration box — usually a stackable wiring closet switch for connecting end users or maybe a rack of servers — Cisco is not your cheapest bet. The company had the highest per-port price for fixed-configuration switches (a superset of Layer 2 and 3, Fast, Gigabit and 10G speeds) at $73 per port. Extreme was second at $72 and Alcatel was third at $48.

However, Cisco is also hedging on the low end of the market, as its Linksys switch brand sold for around $7 per port — third-cheapest among the company’s tracked by Synergy Research Group.

So far, Cisco’s relatively higher prices haven’t severely constrained its market share. According to Yankee Group, whose Zeus Kerravala is quoted in the Network World piece, Cisco accounted for 55% of LAN switch port shipments in 2005, and none of Cisco’s large-enterprise switch competitors accounted for more than 5% of the market in terms of ports shipped.

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