Cisco to Target IBM and Hewlett-Packard With New Server (Update1)
By Rochelle Garner
Jan. 21 (Bloomberg) -- Cisco Systems Inc. plans to sell a computer server that combines storage and networking functions, a challenge to International Business Machines Corp. and Hewlett- Packard Co., a Pacific Crest Securities analyst said.
The product will make it easier for companies to move information and applications among data centers using so-called virtualization software, said Pacific Crest’s Brent Bracelin, who is based in Portland, Oregon. Companies use virtualization software to run multiple operating systems on a single server, saving hardware and energy costs.
“We are calling this the clash of the technology titans,” Bracelin said in an interview. “Cisco is reinventing what was the mainframe, with a whole new category of server that emphasizes the network.”
Chief Executive Officer John Chambers has said that penetrating further into data centers, the vast rooms of computers that store company files and run applications, will fuel Cisco’s growth. Hewlett-Packard, IBM, Dell Inc. and Sun Microsystems Inc. control the computer-server market, which was valued at $12.6 billion in the third quarter, according to researcher IDC in Framingham, Massachusetts.
Cisco, the world’s largest maker of networking equipment, is working on more ways to simplify how clients shift information among networked computers, according to an e-mailed statement from the San Jose, California-based company. Cisco said it doesn’t comment on unannounced products.
Virtual Networks
“Right now, we have virtualized local area networks, virtualized storage and virtualized servers,” Cisco said. “The challenge is integrating the management of those systems so they all work seamlessly. We think the network is the logical place to solve that challenge.”
Cisco rose 39 cents, or 2.6 percent, to $15.40 in Nasdaq Stock Market trading at 9:34 a.m. New York time. The shares lost 40 percent last year.
Emma McCulloch, a spokeswoman for Palo Alto, California- based Hewlett-Packard, declined to comment. Tim Breuer, a spokesman for IBM in Armonk, New York, didn’t return a call after hours seeking comment.
Cisco’s product should be available in the next few months, Bracelin said. The device could be a so-called blade server, said Samuel Wilson, an analyst with JMP Securities in San Francisco. A blade server would allow customers to slide hard-disk drives and other components into a Cisco-made chassis.
Cisco said in November that first-quarter sales rose at the slowest pace in three years as the global economic crisis crimped customers’ budgets. The company leads the market for routers and switches, which direct information on company networks. Cisco already offers a combination network switch and data-storage product.
Untapped Market
Servers are “one of the few, big untapped markets for Cisco,” Wilson said. “They already have all of the market share in routers and switches that they can get, so they have to look at adjacent markets. It’s the only way to grow at the rates they want to grow.”
Chambers, 59, said in December that he’s “comfortable” with a projection of long-term annual sales growth of 12 percent to 17 percent. That goal means Cisco must go after new markets, said Nikos Theodosopoulos, an analyst at UBS AG in New York.
“They will enter the blade-server market and increase their competitive position against IBM and H-P,” Theodosopoulos said.
To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net
Last Updated: January 21, 2009 09:36 EST |
