Cisco’s Chambers Identifies Huawei As Main Threat

Cisco Systems is facing an increasing array of competition in the networking space, thanks to the likes of Hewlett-Packard, Juniper Networks, Avaya and Arista Networks.

But the competitor that apparently is most on the mind of CEO John Chambers is Huawei Technologies.

Rule Breaker?

In an interview with The Wall Street Journal, Chambers said that the giant Chinese telecommunications company, which last year made a strong push into the US market, with hopes of grabbing some of Cisco’s leading market share, was a formidable competitor, and one that doesn’t “always play by the rules.”

Chambers’ comments came 6 April during a Journal-sponsored event in California, and in response to questions from reporters. He didn’t elaborate on what rules Huawei had broken. Chambers suggested the issues were around intellectual property.

“When you look at companies, one of the things you don’t want to do – lack of transparency – you don’t want to have people doubting, will you copy their intellectual property,” he said. “You don’t want to have them doubting about is there security issues, etc.”

He clarified that he was talking about Huawei in particular, not China itself.

“I would not interpret Huawei as China,” Chambers told The Journal. China will protect intellectual property when doing so is in the country’s “best interest. … And that day is coming.”

Chambers’ comments drew a sharp rebuke from Huawei. William Plummer, vice president of external affairs for the company, called the statements “unfortunate,” and said his company has “great respect for Cisco, and, like Cisco, Huawei has earned trust and respect in the over 140 markets in which we do business.”

According to The Journal, Plummer also noted that Huawei has 500 customers who are telecom operators as well as 50,000 patents of its own. “Huawei has a strong history of respect for the intellectual property rights of others, and the protection of our own,” he said.

Cisco and Huawei have a history of tough competition, with Cisco reportedly suing Huawei for patent infringement, a case that was settled a year later.

The Chinese company’s networking business made a strong push into the North American market last year, hoping to grab some market share from Cisco and other vendors. It was the latest challenge to an enterprise networking space that has for years been dominated by Cisco. However, over the past couple of years, vendors like HP and Juniper have positioned themselves as lower-cost alternatives to Cisco, and have succeeded in stealing away some share in the switch and router markets, according to analysts. Cisco executives have hit back, saying their rivals only offer “good enough” networking solutions.

Biggest Threat

Chambers has been quick to point to Huawei as the rival he is most wary of. At the company’s Analyst Day in September 2011, Chambers brushed aside HP, Juniper and Avaya as threats. He had more cautious words for Huawei.

“Huawei – it’s going to be a tough one,” Chambers said. “Those first three [Juniper, HP and Avaya], I think we have a good chance of completely distancing them and leaving them behind, and I measure our success on whether we do that or not. Huawei is going to be a very tough long-term competitor.”

He suggested at the time that Cisco take the offensive in the competition with Huawei and make a strong push into the Chinese market.

Security Concerns

However, Huawei in recent weeks has seen its share of struggles, due in large part of the perception that the company has a tight relationship with the Chinese government and military, a claim the company denies.

Huawei officials in March learned that the Australian government had banned the company from bidding on a $38 billion (£24bn) fibre-optic network in that country. Australian government officials did not say why they placed the ban on Huawei, though reports indicated that the country’s intelligence officers were concerned about recent hacking attacks that allegedly were tied to China.

In addition, Symantec executives last year decided to end a four-year alliance with Huawei, and last month completed the $530 million (£333m) sale of its 49 percent stake in Huawei Symantec Technologies. The joint company develops network security solutions.

Symantec officials last year said it was time for the joint venture to have a single owner. However, reports from The New York Times and others indicated that Symantec officials worried that Huawei’s close ties with the Chinese government would make it impossible for Symantec to receive classified information from the US government regarding cyber-security threats.