Cisco Systems Inc, introduced a new router that it says will handle Internet traffic 12 times faster than rival products, as it looks to compete with rivals such as Juniper Networks Inc.
The router, Cisco's first major upgrade in six years, is aimed at helping operators handle surging Internet use driven by driven by popular smartphones like Apple Inc's iPhone and Web services like Google Inc's YouTube.
The company boasted that 72 of the new CRS-3 routers connected together could deliver every movie ever made in four minutes over the Internet, or connect China's entire population of 1.3 billion by video conference all at once.
Analysts said that the new product was important for Cisco; but at least one said that by the end of this year Juniper will already have technology that rivals Cisco's product, which becomes available in the third quarter.
By the end of the year, I expect them to be the same in terms of equivalent performance and capacity, said Avian Securities analyst Catharine Trebnick.
She estimated that carriers spend about 3 percent of their capital budgets on high-powered core Internet routers.
The CRS-3 router, which was developed over three years and supports data speeds three times faster than Cisco's existing products, goes on sale starting at $90,000 each, said Cisco.
It's a big deal for Cisco and its carrier customers because these things come only every six years, Broadpoint AmTech analyst Mark McKechnie said of the new router.
But analysts said it will be a long time before the product helps revenue at Cisco, which said it has invested $1.6 billion in the CRS product line.
It's probably a long evaluation cycle, so it's not something we think will really impact Cisco numbers until 2011 or 2012. It takes a while for these things to ramp, McKechnie said.
That didn't stop Cisco from heralding the new router as a product that would forever change the Internet and show what's possible when networking gets an adrenaline boost.
It's an important step. You need to do this with the demand in data rising; but it doesn't live up to the name of the conference, Trebnick said. Cisco called the webcast on which it introduced the new router Revolutionizing the Internet.
Shares of Cisco shares were up 4 cents at $26.17 in afternoon trading on the Nasdaq, after climbing 4 percent to touch a 12-month high on Monday, partly in anticipation of the announcement.
In its optimal configuration, in that network of 72, Cisco said the new router could deliver the entire printed collection of the Library of Congress, the world's largest library, in just over a second.
If we don't provide this type of foundation for the future of the Internet, we actually become the constricting factor on the ability for it to grow, Chambers said on a webcast announcing the product.
AT&T Inc, the biggest U.S. telecommunications company, said it had successfully completed a 100-gigabit-per-second field test of the new router and expects it to be ready for deployment in the next few years.
On Monday, AT&T's biggest rival Verizon Communications Inc and Cisco's biggest rival Juniper said they had completed a field trial at a similar speed.
Juniper shares were up 14 cents to $29.74.
Cisco has benefited from the rising popularity of bandwidth-hungry Web services, which has driven sales of powerful network equipment.
Cisco said on the webcast that it expects to keep selling the CRS-1 for many years even after it launches the CRS-3. It has already installed more than 5,000 of the CRS-1 routers in networks around the world, the company said.
The news comes a week ahead of the expected announcement of the U.S. Federal Communications Commission's National Broadband plan, aimed at boosting high-speed Internet adoption in the country.
The FCC is expected to propose that operators provide minimum Internet data transmission speeds of 100 megabits per second (Mbps) to 100 million homes within a decade. Today's typical speeds are closer to 4 Mbps, according to industry estimates.
(Additional reporting by Franklin Paul and Rodrigo Campos; Editing by Gerald E. McCormick and Tiffany Wu)