Mikael Abrahamsson <swmike@swm.pp.se> writes:
Is there anyone who can justify this pricing with anything else than "because we can?"
To expand on what I said to you privately, let's follow the money: Assume $200,000/board as the marginal cost of manufacturing one. Assume a minimum of 65 points off for any customer who buys a CRS-1 (hint: large telcos do not pay list price... and nobody, not even certain well-known crazy people, is going to pay money for one to use as a SOHO router). So now we have a strawman marginal profit per board sold of $150,000. Assume that Cisco actually has about a billion dollars into the HFR project (offhand comment by a usually reliable source). That means that ignoring the chassis sales side, we're looking at about 6700 interface cards (> 26500) OC192 IR ports sold to get back the initial engineering investment. That's not figuring in the cost of support for those 6700 cards out in the field; you're probably looking at 8500 or more cards (> 34000 ports) sold in order to hit break-even. Now consider the size of the market. You're not selling PAs for people's 7200s here, and you're selling a card that replaces *four* cards on a lesser platform. Under the circumstances, I'm not sure that Cisco's list price is high enough, but I'll defer judgement on that to the people who run the numbers behind the scenes in San Jose. They're the ones whose jobs are on the line if this product turns out to be $1b bragging rights exercise with no hope for payback. If you find the prices staggering, it's likely that you and your organization don't need this product. Arguments about price gouging on memory, GBICs, power cords, and other commodity items that your organization actually *does* need are orthogonal to this discussion. ---Rob