Like others in the technology sector, networking executives say they must stay aggressive with technology innovation because they fear they will lose customers in the future if their products are not up to snuff. Although spending is down now, networking companies want to be ready when their customers regain their appetite for faster and better networking hardware that speeds Internet and private data traffic from one area to another.
"The economy will eventually come back," Foundry Networks Chief Executive Bobby Johnson said in an interview. "We want to build as much new technology as possible and be ready when customers are ready to buy again."
Out of about US$5 billion in quarterly revenue, Cisco Systems last quarter spent $970 million on research and development. Extreme Networks, which raked in $112 million in revenue last quarter, spent $16.5 million on research and development. Foundry, which earned $82.5 million in revenue last quarter, spent $7.9 million in new technology research.
Company executives interviewed at the Networld+Interop networking-industry trade show this week said they have employed different strategies to ride out the rocky economic climate. With sales and profits declining, most are struggling and in the throes of reorganisations that include layoffs. Some companies, like Extreme, have refocused their sales efforts from North America to countries where the economy is better. Others, like Foundry, have cut back on advertising and marketing efforts so they can hire more engineers to develop new technologies.
Alcatel's unit that sells networking equipment to businesses moved employees from its data business to the faster-growing business of Internet-based phone systems, according to executives. The company recently entered the Net-based voice equipment market.
