Parts shortages show just how much Cisco dominates

Opinion

Parts shortages show just how much Cisco dominates

On Friday we reported that Alcatel-Lucent has again blamed a worsening components drought for lacklustre quarterly numbers.

The issue first came to light in early May, when chief exec Ben Verwaayen lifted the lid on disappointing Q1 results.

But speaking last Friday, Verwaayen said he did not see the issue being resolved before late autumn at the earliest.

And more and more firms in our industry are affected, according to our sister publication ElectronicsWeekly.com.

Before, we've talked about how reduced demand for components during the recession has hit western companies hard, with production capacity in China lagging behind recovering demand.

But that's not quite the entire story.

Cisco was among the first to report an issue earlier in 2010, and at its Partner Conference trotted out a pretty convincing argument that the problem was over. Which it was, in Cisco's view.

But Cisco is a huge company that commands a leading share of the market and despite what some of its rivals say, I still believe it's pretty much unassailable. It doesn't just do network plumbing anymore, it does cameras, home routers, tablets and video.

Now, this is not to say Alcatel-Lucent's technology is bunk, it's is doing great work in many areas, but its core business can't compete on the same level.

These suppliers know that they can't leave a company like Cisco hanging for their own fortunes and their huge contracts are guaranteed by its success.

The net result is that like a sponge, firms like Cisco soak up available supplies while the competition scrabbles for what is left.

The parts shortage shows how despite the rhetoric of its competitors, the networking industry is completely dominated by Cisco. So it's no good asking them how they feel about components shortages; they have no problem because they're at the front of the queue.

This was first published in August 2010

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