Cisco Enters Server Market, Challenging Industry Leaders

Strategic Insights -

Cisco Systems, the networking company, has made a surprise move into the server market, announcing a unified computing system that combines its networking strengths, Intel's latest processors, and access to storage networks. This move is expected to pose a threat to industry leaders such as IBM, Hewlett-Packard, Dell, and Sun. Cisco's system is designed to provide a next-generation platform for data centers, storing corporate data.

The announcement was made by John Chambers, Cisco's chief executive, who emphasized the company's ability to provide a comprehensive solution that integrates networking, processing, and storage. Bob Beauchamp, chief executive of BMC Software, a Cisco partner, added that the gap between Cisco's offering and the rest of the market is significant. Cisco's system includes virtualization techniques, which allow servers to be divided into different virtual machines to complete tasks.

However, industry analysts have noted that Cisco is entering a lower margin, more commoditized market, and that the company's success will depend on its ability to charge premium prices for its all-in-one product. The server market is experiencing sharp falls due to the economic downturn, with server shipments declining by 12% and revenues by 15% in the fourth quarter, according to a report from Gartner. The market share of industry leaders is: IBM 33%, HP 30%, Dell 11%, and Sun 10%.

Key Takeaways:

  • Cisco's unified computing system combines networking strengths, Intel's latest processors, and access to storage networks.
  • The system includes virtualization techniques that allow servers to be divided into different virtual machines to complete tasks.
  • Industry analysts have noted that Cisco is entering a lower margin, more commoditized market.
  • Server sales are experiencing sharp falls due to the economic downturn, with server shipments declining by 12% and revenues by 15% in the fourth quarter.
  • Gartner analyzed the market share of industry leaders, with IBM 33%, HP 30%, Dell 11%, and Sun 10%.
  • Cisco is cooperating with VMware to include money-saving virtualization techniques in its system.

Statistics:

  • Server shipments declined by 12% and revenues by 15% in the fourth quarter, according to Gartner.
  • Industry leaders' market share: IBM 33%, HP 30%, Dell 11%, and Sun 10%.
  • Cisco is experiencing growth in the "blade" server segment of the market, a potential area of strength for the company.

Sources:

  • Gartner research firm
  • Ovum consulting firm
  • BMC Software
  • VMware
  • Dell