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Cisco's Chambers: white box is dead and WE KILLED IT

Lock-in still a winning strategy, outgoing CEO tells CNBC

Cisco's now-outgoing CEO John Chambers has reiterated his belief that the Borg has already beaten off the white-box market.

In an interview with CNBC – transcript here (with editing suggesting voice recognition rather than human transcription) – Chambers says that extending the company's lock-in strategy across platforms and applications has worked.

Well, that's not how he puts it to CNBC, but that's how it looks if you read between the lines in his answer to “Squawk on the Street” interviewer Jim Cramer. Cramer gave Chambers a free kick by saying the “white box” market hadn't performed as well as expected, and Chambers was happy to oblige:

“Jim, i think you gave me a softball on that and thank you for that. Four-and-a-half years ago we said white boxes would be our competitor. We built architectures tying products together with services and applications” (emphasis added).

While Chambers would probably object to having a strategy of tying boxes to services and applications described as a lock-in strategy, The Reg's networking desk thinks it's a fair characterisation.

That suffocating embrace strategy, he says, gives Cisco a lower cost of ownership over a whole solution than the white box market, which he says “we are beating … very well”.

“We took our challengers, understood what they did well then just out executed them”.

The long-term Cisco strategy of outsourcing some of its R&D to Silicon Valley startups and buying them he described thus: “We identify the market transitions well ahead of our peers. We usually beat them on the front end. If we miss it, we go acquire somebody and beat them on the back end.”

Chambers gave an interesting hint to life-after-CEO, telling Cramer that the US has fallen behind Europe and Asia in digitising “every aspect of business, every aspect of government, every aspect of our home life”.

Rather than a direct entry into politics, Chambers says he's going to take up a lobbyist life: “I am going to invest a fair amount of my time and capital on trying to get both the current leaders in congress and the administration, plus the next generation of leaders that come in … to get our country back into a leadership role.”

While Chambers isn't going to be making the decision, he doesn't think much of a return to the consumer market. When Carl Quintanilla asked about the consumer market, he said it's a “business that we tried once before and missed”, noting that margins are slim, sustainable differentiation is hard to achieve, and there's not much to like about Cisco being in a market where it would have less than 40 per cent market share. ®

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