New Cisco Tablet Pressures RIM

Cisco Systems entered the business tablet market with an Android-based mobile-computing device coined “Cius.”

The price is targeted at under $1,000 per unit, with customer trials starting in the third quarter, limited availability in December 2010, and general availability in the first quarter of 2011. Longer term, we would not be surprised if the Cius is sold into the consumer market; however, that is not the intent of Cisco’s initial version.

Based on the Google Android operating system, the Cius has a 7-inch high-resolution touch-target color display and is powered by a 1.6-Gigahertz Intel Atom processor with eight hours of battery life. The device also supports Wi-Fi and 3G/4G, along with desktop virtualization. An important differentiated feature, in our view, is that the Cius is also interoperable with Cisco’s TelePresence for videoconferencing and works well with the company’s Flip video camcorder, while including a front-mounted 720p HD camera (30 frames per second) and a 5-megapixel camera in the rear that can capture both video and picture.

The market was surprised by Cisco’s tablet announcement, but given the developments in the enterprise, we believe Cisco is well positioned to capitalize on the trends in the workplace, such as collaboration and the rise of the mobile user. This product introduction dovetails with Cisco’s pursuit of market transitions such as collaboration (and Web 2.0 technologies) and video over the network. Cisco has estimated the collaboration market as a $34 billion market opportunity and has been aggressively launching new products over the past year.

We view Cisco’s entry into the business tablet market as most negative for Research in Motion, which we believe will introduce a tablet device in the coming months and now must compete with a new competitor in the enterprise market. Research in Motion is already feeling the heat from Apple in the smartphone market. Given Cisco’s longstanding relationship in the enterprise and growing collaboration tool box, we believe the company has a leg up on the competition in pursuing the business tablet market.

In our view, this provides another example of Cisco’s innovation and expanding market opportunity that we believe supports the company’s 12%-17% sales growth projection (during normal economic times), while pushing the company toward the $100 billion revenue base that we believe Cisco can achieve over the next decade.

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