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Networks down

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DQW Bureau
New Update

Even the mighty are not immune to the downturn in the US economy. While HP's troubles were predicted, the shock has come from Cisco. This poster boy of the Internet era, which became a stock market darling barely a year ago has reported massive layoffs and decline in revenue.

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It is a mighty fall, even if temporary, for Cisco, which was considered among the most valuable companies in 2000, ahead of many old economy giants. John Chamber, Chief, Cisco's brave words, during his India visit in January that an economic downturn will not hit top networking company has been belied. What has actually shocked the industry is the massive $ 4 billion Cisco wants to write off in the previous quarter, because it is an unprecedented figure in its scale. 

Is Cisco in real trouble? It is not. The dotcom washout has certainly impacted Cisco's sales. After all, Cisco's products were at the center of the increasingly networked world. It is possible that Cisco is competing with its own products, which have reached the market through the secondary market by dotcoms going burst. Similarly, analysts feel that the huge $ 2.5 billion inventory write off is more of an accounting process than a real one. 

Cisco had acquired nearly 60 companies in the last two years and in a clever accounting practice, it may be writing off all the accumulated inventories at one go. And squirreling away funds for future downturns. For a drowning person, it is immaterial whether the water level is an inch or a foot high. Same way, it was taking a hit anyway in the quarter, so might as well go the full way, might be the reason for the huge write off say analysts.

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But the other results for the JFM quarter from tech giants in the US are mixed. IBM continues its onward march. And shows no sign of slowing down, thanks to its strong presence in the services segment along with the Net and products. There is however an interesting twist in the microprocessor market, which will be of interest to Indian players. AMD is gaining market share, taking it away from Intel. Processors from AMD have gained a four- percent share, from 17 to 21 in JFM. Intel's share has slipped to 77 percent from 82 compared to the previous quarters. This means that PC buyers are increasingly reposing their faith in the AMD processors. Apple too has not done badly with its ultra-thin Titanium notebooks and high-end PowerMacs for graphics designers doing brisk sales. 

The PC players expect a weak AMJ quarter, but are hopeful of brisk sales when the much awaited Windows XP hits the market. A rebound is expected in the second half of 2001.

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