4th UPDATE: Cisco Unveils Faster Internet RouterTuesday 03/09/2010 4:09 PM ET - Dow Jones NewsNEW YORK -(Dow Jones)- Cisco Systems Inc. (CSCO) unveiled a smarter, faster router Tuesday following weeks of hype over the networking titan's promise to "forever change the Internet."
The CRS-3 router, which the company said carries 12 times the capacity of rival equipment, comes as the amount of Internet, video, gaming and email traffic explodes over both the wired and wireless networks, overwhelming the service providers.
At the same time, there have been increasing calls for higher-speed Internet access, ranging from Google Inc. (GOOG) to the federal government. Cisco is hoping its new router, which replaces the aging CRS-1, can provide some relief.
"There are many congestion points in the Internet, and Cisco is starting right at the heart of the matter with a big bad router," said Mark Sue, an analyst at RBC Capital.
AT&T Inc. (T), a key Cisco customer, said it had completed a test using the router to carry traffic at 100 gigabits per second, or roughly 10,000 times faster than the average household cable or DSL connection. Cisco said the router could stream every movie made in less than four minutes and download the entire content of the Library of Congress in a little more than a second.
"Our successful 100-gigabit field trial---the world¹s first--puts us ahead of others in deploying the next generation of technology that supports wired and wireless broadband growth," said AT&T Chief Executive Randall Stephenson.
Consumers won't see those kinds of speeds because the router is located in the center of the network, and has to serve many people. Cisco said the CRS-3 can deliver a connection of one gigabit per second to nearly every home in San Francisco. But there remain other bottlenecks, including the direct connection between homes and the larger network, which would make achieving such speeds difficult.
Cisco Chief Executive John Chambers said the new router provided more than just a boost. The product is supposed to be "smarter," allowing it to direct traffic based on the priority of the data.
"It's about flexibility," Chambers said. "It's not just about raw speed."
Cisco said it has invested $1.6 billion in the CRS family of routers. The CRS-3 will start at $90,000 in the U.S. Beyond the higher capacity, the router costs less money to run than the previous version.
The product isn't expected to contribute significantly to revenue in the near term. The core routing business makes up 4% of the company's total revenue, said UBS analyst Nikos Theodosopoulos, noting it has lost market share to China-based Huawei Technologies Co. over the past few years.
Cisco declined to comment on the financial impact of the product but said the CRS-1, which launched in 2004, has sold 5,000 units over the past five years.
The San Jose technology stalwart let an unusually large amount of hype build around the announcement, claiming that it would give networking an "adrenaline boost." A countdown clock ticked off the time before the company unveiled the details. Cisco shares have risen 9% over the past two weeks amid the speculation.
"If it hadn't been preceded by all of the hype, I think I would have been impressed," said Zeus Kerravala, an analyst at Yankee Group.
Cisco shares were recently down four cents to $26.09, while AT&T stock recently was up 1.2% to $25.58.
Some see Cisco's plans as an answer to Google's own push to deliver an ultrafast Internet connection directly to consumers. Last month, the Internet search giant shook up the service provider industry with its own plans to build its own high-speed network in select communities. Cisco, which is heavily dependent on the service providers for revenue, needed to show its support for its customers, analysts say.
The moves come ahead of the Federal Communications Commission's National Broadband Plan, which is expected to call for up to $25 billion in new federal spending for high-speed Internet lines, a wireless network for public safety groups and expanded access of affordable service. The plan is slated to be released later this month.
Rivals downplayed the significance of the new router.
"We've been delivering 100 gigabit-capable systems since 2007," said Mike Marcellin, a marketing executive with Juniper Networks Inc (JNPR). "We welcome Cisco to the 100GB club."
AT&T, meanwhile, said the 100-gigabit backbone Internet network would support growing wireless and wired Internet data and traffic "for years to come." In particular, AT&T has dealt with the explosive growth in wireless data, primarily driven by the Apple Inc. (AAPL) iPhone.
"The growth in mobile broadband is a powerful trend that shows no signs of slowing and AT&T is leading the industry," Stephenson said.
Yankee Group's Kerravala estimates it would take tens of CRS-3 routers for AT&T to fully cover the country. The company declined to specify.
Unlike Google, Cisco would never compete against its service provider customers, Chambers said.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
[email protected] (END) Dow Jones Newswires
03-09-10 1609ET
Copyright (c) 2010 Dow Jones & Company, Inc.
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