- The Washington Times - Saturday, March 14, 2009

NEW YORK (AP) - Cisco Systems Inc. is expected to provide details on Monday on its push into the server market, a move that is seen as treading on the toes of longtime partners Hewlett-Packard Co. and IBM Corp.

Chief Executive John Chambers is scheduled to present the company’s vision of “Unified Computing” at a morning press conference.

Quite a few details of Cisco’s plans have leaked out already. Cisco talked about its server plans for the first time in January. It’s a big step for a company that has so far focused on networking equipment, and could bring it into conflict with the companies that sell the computers connected by Cisco equipment.

Analysts have noted that margins in the server market are far lower than those in Cisco’s core business.

Stifel Nicolaus analyst Sanjiv Wadhwani said Friday after meeting with a Cisco executive that Cisco is about to announce a server code-named “California” as part of a package for data centers. It’s designed to integrate with VMware Inc.’s virtualization software, which lets one computer act like several machines. That technology is already reshaping data centers.

“California” is in the “blade” category _ thin, relatively low-end servers that can be rack-mounted in great numbers _ and is powered by Intel Corp. chips, Wadhwani believes.

“Cisco’s goal is to radically change the way data centers are designed, built and operated,” Wadhwani wrote in a research note.

He believes Cisco will be able to charge a premium for servers that can use virtualization to configure themselves regardless of physical location, thus getting away from the low-margin trap. It could be a $5 billion business for Cisco in a few years, he believes.

Mike Banick, vice president of marketing at Cisco competitor Juniper Networks Inc., said he expects Cisco to use proprietary technology to tie the different components of a data center together, and tie customers into buying its products as a package.

That goes against the trend of customers wanting increasing flexibility and freedom to buy from different vendors, he said.

Juniper is collaborating with IBM on developing data center technologies, and doesn’t make servers.

“IBM and HP have had the leadership in that market for a long time, and I can only imagine that it’s very challenging to enter,” Banick said.

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