Excerpt from a timely Cisco snapshot
Chambers may have more to lose than his rivals. As he moves into the computer server market led by HP, Chambers has provoked a counterattack on his core business of routers and switches, which direct traffic around the Internet. HP said on Nov. 12 it would buy networking equipment provider 3Com (COMS) to step up its assault. The trouble for Chambers is that gross margins in the server business are around 20%, compared with 65% for routers. As Cisco gets more revenue from servers, its overall margins will likely fall, while HP will probably see margins rise as it sells networking gear. "I'd rather be HP than Cisco right now," says Steve Deplessie, founder of the research firm Enterprise Strategy Group.