Cisco (CSCO), the networking giant that for decades thrived on selling expensive hardware, is moving towards separating out some of its key software for use in lower-end switches, The Information reported, citing two people familiar with the company's plans.
The new operating system in the works is called Lindt, and the purpose is to keep customers from moving to networking companies like Arista Networks (ANET) and Juniper Networks (JNPR), whose software can run on so-called white box hardware, according to The Information.
The move could hurt revenues and profit margins for Cisco's switching business, the company's largest business segment by revenue. The risk is that customers will simply buy Cisco's software without the higher-margin hardware, and use cheaper boxes instead. In the fiscal year ended July 30, 2016, Cisco's switching segment booked $14.7 billion in revenue, 36 percent of the company's total.
Like all legacy technology vendors, Cisco is under pressure from cloud providers and software-based infrastructure companies that are giving businesses enhanced tools and features without forcing them to buy big expensive hardware.
Read the full report on The Information (subscription required).
(Correction:This story originally misstated the scope of the change being reported. Cisco is actually looking to allow its software to be used on less expensive Cisco switches.)
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