(Bloomberg) -- Shares of data networking companies including Cisco Systems Inc. tumbled after a report that Amazon.com Inc.’s cloud unit may begin selling its own switching devices.
Amazon Web Service’s plan to enter the $14 billion global market for the equipment that helps shepherd traffic around networks, signals the company may become more entrenched in the enterprise computing marketplace, The Information reported, citing a person with knowledge of the discussions. It would pose a formidable challenge to existing players including Juniper Networks Inc. and Arista Networks Inc. because AWS would price the so-called white-box switches from 70 percent and 80 percent less than compatible ones from Cisco, the news site reported.
Cisco relies on hardware for more than half of its revenue, and switches and routers comprise the two biggest hardware products. Its shares fell as much as 6.1 percent to $40.94 Friday in New York. Juniper Networks fell as much as 3.9 percent to $27.40, and Arista slipped as much as 6.2 percent percent to $261.16.
Every time Amazon makes a move into a new industry, those companies’ stocks shudder as the market considers the consequences on market share and pricing power. Shares of drugstore companies including Walgreens Boots Alliance Inc. and CVS Health Corp. sank almost 9 percent on news in late June that Amazon was acquiring prescription-drug delivery company PillPack. Grocers like Kroger Co. plunged when Amazon acquired Whole Foods Market for more than $13 billion in June 2017.
Amazon did not immediately respond to requests for comment.
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