David Gross'  Instablog

One of the great debates taking place right now within the optical components industry is whether to outsource production, and move to a fabless model like most logic chip makers. One one side of the argument, Finisar (FNSR) is staying in-house, while rival JDS Uniphase (JDSU) is preparing to send its manufacturing operations to Fabrinet in China.

Just about every aspect of Cisco's (CSCO) business is envied throughout the network equipment industry.  Its balance sheet, its market share, and its distribution network have scared away dozens of potential competitors.   Yet somehow the executives at Tasman Drive have become dissatisfied with owning 70% of the routing and switching market, and would now rather compete for 5% of the server market.

While there is little reason for Cisco to expand out of networking, there is also little reason to expect that the rumored IBM OEM deal can help Brocade (BRCD) take much share from Cisco in the nearly $20 billion a year Ethernet switch market, particularly when the Foundry products it acquired last year have done best in segments where customers buy directly from manufacturers.   Additionally, Brocade itself is straying from its dominant position in storage networking in order to pick up a sliver of the LAN switch market.

Big Customers Still Buy Direct, and Prefer Alternative Suppliers