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Cisco is still hard-coding passwords into its products
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That could be any user logged into the CLI. Cisco is famously a network appliance company and they make admin available over the network. Anyone who can get to the LAN/VLAN these appliances are on can exploit this. So not specifically physical access.
You are right:
Holy fuck.
Management interface is only available locally
The management interface can 100% be put on LAN and often is.
Okay sure then you're asking for trouble. You could also configure the word password as your password.
I agree, its not something I would do.
Doesn't change that it happens.