news Networking hardware giant Cisco has slapped a blanket 9.2 percent price increase on all of its products and services in Australia, giving its customers and partners just one month’s notice of the price rise.
The company’s Australia and New Zealand financial controller Jill Allen announced the changes in an email, seen by Delimiter, to the company’s Australian sales team last week. “Cisco is giving 30 days notice of our intention to increase prices by 9.2% for Cisco Products and Technical Services,” Allen wrote. “This price increase is effective 9th July 2012. Orders received on or after this date will be processed at the revised higher price.”
“I would ask that the Partner Team communicate this to our Gold and Silver Partners and also ask that any account manager whose customer buys directly from Cisco ensures their customers are informed of this price rise. This may result in customers bringing forward their purchase. Please ensure customers understand that all sales are considered final. Please note also that quotes produced over the next 30 days are valid until 6th July 2012 only.”
Cisco spokesperson William Oei confirmed the legitimacy of the email. “This decision is the result of our regular business review processes that we conduct periodically and takes into consideration a number of factors. In the past, this process has also lead to reduced prices when certain conditions are met,” he said.
The news comes as Cisco has recently been growing its revenues and profits in Australia. In the company’s local financial report filed with the Australian Securities and Investments Commission for the year ended 30 July 2011, the company detailed local revenues of $1.24 billion for that period, up 10.5 percent for the period from $1.12 billion. Local profits for that period were $7.3 million, compared with a loss of $13.07 million the previous year. Cisco’s major expenses in that period was the cost of purchasing its goods from its US parent, at a cost of $834.31 million in 2011, and employee-related expenses ($272.39 million).
Cisco’s price rise also comes at a sensitive time for corporations selling technology-related goods and services in Australia.
In late April, Communications Minister Stephen Conroy confirmed the Government would hold an official parliamentary inquiry into the issue of technology companies marking up goods and services for Australia, following a long-running campaign by Federal Labor MP Ed Husic. Husic has been raising the issue in Parliament and publicly since the beginning of 2011 (he was elected in the 2010 Federal Election), in an attempt to get answers from technology giants such as Adobe, Microsoft, Apple and others as to why they felt it was appropriate to price products significantly higher in Australia (even after taking into consideration factors such as exchange rates and shipping) than the United States.
The Chair of the Committee investigating this issue, Nick Champion, said last month: “Australians are often forced to pay more for IT hardware and software than consumers in overseas markets. The Committee’s inquiry aims to determine the extent of these IT price differences and examine the possibility of limiting their impact on Australian consumers, businesses and governments. The Committee will look into the cost of computer hardware and software, including games, downloaded music, e-books, and professional software, to name a few. The Committee is looking forward to hearing from the companies who set these prices and the consumers and businesses that purchase their products.”
I’m betting that Cisco’s Australian prices were already more expensive than its US prices, and that the company’s new price rise this month comes on top of already hefty premiums paid locally. Along with Oracle, Cisco is one of the enterprise IT companies globally already known for its expensive gear — and now it’s even more expensive.
Personally, I find it hard to see a 9.2 percent price hike on equipment that is worth hundreds of thousands — and sometimes millions — of dollars legitimate. Up to five percent in one month? Customers could probably weather that. 9.2 percent over 18 months? That could probably also be weathered. But 9.2 percent in a single month is a little bit extreme. If I were a Cisco Australia’s partner or customer (and that’s a lot of people), right now I’d doubtless be a little frustrated with San Jose.
It’s also not the best look for Cisco Australia’s new chief Richard Kitts, who has only been in the role since March this year. On the other hand, at least we know that Kitts is serious about the “profitable growth” which he cited upon being appointed to lead Cisco Australia in January.
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