Is Cisco spreading itself too thin with venture into server market?
By Dave Jeyes
San Jose-based Cisco systems is set to launch a line of Internet-focused servers, taking on former partners like IBM and HP. Could the company drifting too far from its core competency during a down market result in ruin?
Cisco has an overwhelming market share of the routers and switches that power the Internet. The company has long made good bedfellows of server companies who never saw it as a threat to their market share.
Now Cisco is preparing to launch its own line of server hardware with advanced virtualization capabilities. This marks Cisco Systems entry to a market with fierce competition and low margins compared to networking gear.
This launch is the second announcement this month of new Cisco products outside of the company’s core competency. Earlier in the month Cisco announced a home stereo networking system that is aimed at the consumer market.
Cisco’s Wireless Home Audio System was released through the company’s Linksys brand and streams music to multiple rooms in a home. Linksys is a leader in home networking equipment and this is the division’s first attempt at courting fickle audio consumers.
In both of these instances, Cisco is entering highly competitive and well-established markets. The push into the server market also alienates Cisco partners in the major server vendors.
Conventional wisdom would lead Cisco to focus on its core competencies during a downturn. A recession is simply a difficult time to invest in marketing to new audiences, more especially when servers are a commodity.
However, it would be unwise to count Cisco’s line of servers out so soon. The company has experience building devices that operate at a larger scale than nearly anyone else on the Internet.
If Cisco’s server products can handle large amounts of traffic efficiently and inter-operate with the company’s networking gear seamlessly, they might replace equivalents from other vendors. Even so, a deepening recession could spell trouble for anyone betting on companies upgrading their servers.
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January 20th, 2009
Our CTO, Padmasree Warrior, wrote a blog piece yesterday on “unified computing” which states, in part: “Lately, there has been a lot of speculation by the technorati that “something is going on over at Cisco!” I am sure you have all read the blogs and reports in traditional media asserting that Cisco is going to enter new markets, compete for new business, and build new products. The answer? Yes, Yes and Yes, of course!”
See full blog post here: http://blogs.cisco.com/news/comments/introducing_unified_computing_to_the_data_center/