Relations between the two companies started to deteriorate when Cisco entered the server market last year, a move that HP says is starting to backfire.
"They picked a battle that they can't win, because running a data center is very different to running a network," David Gee, HP's vice president of worldwide marketing, told TheStreet. HP, he added, offers a "three-legged stool" of technology containing networking, storage and server compute power, whereas Cisco's expertise is mainly in networking.
"It's pretty hard to sit on a one-legged stool," he quipped.Cisco, which first stepped on HP's toes in 2009 when it launched its UCS server product, didn't have the smoothest summer. The Silicon Valley heavyweight gave tepid second-quarter guidance and CEO John Chambers famously noted that Cisco hit some "air pockets" in IT spending. HP claims that it is adding to Cisco's problems. "I think that those 'air pockets' are being certainly fueled by the combination of HP's networking business with 3Com," said Gee. "We're giving them a run for their money on performance and the geographic footprint that 3Com can get to." HP splashed out $2.7 billion on switch maker 3Com last year in a move that was seen as a major challenge to Cisco, particularly in the lucrative Chinese market. 3Com's H3C subsidiary is a major player in China, which is in the midst of an economic and technology explosion. Following Cisco's server launch, HP also ramped up its ProCurve networking technology, bolstering its network security story by acquiring ArcSight. During its recent fiscal fourth-quarter, HP's ProCurve business grew 50% compared to the prior year's quarter. Including the 3Com acquisition, the company's networking revenue grew 227% over the same period. "At this point, it seems that HP is gaining some market share in the networking business," Kaushik Roy, an analyst at Wedbush, wrote in a recent note. He added that the 3Com products are still sold mainly in Asia. "As HP puts more emphasis on selling 3Com in the US, we believe HP will gain more share in networking."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV