Cisco May Brandish Its Own Blade Server

Cisco(CSCO) may be planning a major move into the blade server market next year, potentially going head-to-head with IBM and Hewlett-Packard, two of its biggest partners.

The networking giant already offers switch technology for Hewlett-Packard(HPQ), IBM(IBM), and Dell(DELL)'s blade offerings, although Cisco has not offered its own blade servers before. This, however, could soon change; the company has already started work on its own blade technology, according to Vikram Mehta, CEO of networking specialist and Cisco rival Blade Network Technologies.

"It's a blade server system that will compete head-on with offerings from H-P and IBM," he told TheStreet.com. "I have seen the box -- I know a blade server when I see one."

Blade servers, which are thinner versions of traditional servers, have grown in popularity in recent years, as users attempt to overcome their data center space constraints.

The Cisco offering, code-named "California Server", is rumored to use Intel(INTC) processors, and Mehta says that the server will be "closely coupled" with the networking giant's Nexus switch.

"If you're the size of Cisco, you're looking at the server market that's $67 billion and saying, 'I want a piece of that,' " adds Mehta. "They are looking at what their next growth opportunity is."

Cisco declined to comment for this story.

With Cisco stock currently trading around $16.40, well below its 52-week high of $29, a blade server revenue boost would be welcome news for investors. The tech bellwether recently sent shockwaves through the industry when it forecast a weak second quarter amid tight enterprise and service provider budgets.