"We need to evolve our software strategy," he said. "We have a good value proposition because we [bundle] hardware, software and ASICs [Application Specific Integrated Circuits]. Do we charge as much as we should, or as much as we could? Probably not."

In comments to reporters at Cisco Networkers 2006 in Las Vegas, Chambers said Cisco should begin considering charging separately for some of the software now bundled into its hardware. He offered no details about specific plans or strategies, however.

In reaction, several customers at Networkers said they were surprised by Chambers comments and wanted more details. But some wondered whether Cisco's overall prices for what many already consider the most expensive networking gear and annual support services on the market would rise further.

"My skeptical side wonders if this is a way to raise prices. But on the other hand, I wonder if there is some opportunity here that I don't know about," said Robert Fort, director of IT at Virgin Entertainment Group Inc. in Los Angeles. Virgin Entertainment uses nearly 500 Voice over Internet Protocol (VOIP) phones and related gear in 15 retail stores and its headquarters. That hardware cost about US$1 million.

"We've done very well, but Cisco is the Cadillac of networking," Fort said, adding that he and Cisco customers sense that paying premium prices for equipment and services results in a lower total cost of ownership.