Cisco Fires at Rivals With Silver-Bullet Server

Cisco Systems' ( CSCO) plans to break into the server market finally became flesh Monday as the networking firm unveiled new hardware and a slew of partnerships with the likes of Microsoft ( MSFT), EMC ( EMC), VMware ( VMW) and BMC ( EMC).

Cisco's blade server-driven strategy has been one of the tech sector's worst-kept secrets of the last few months, although opening up new revenue streams is crucial to Cisco's future performance.

Initially code-named "California Server," Cisco unveiled its "Unified Computing System" (UCS) at a bizarre tele-presence meeting where the company's executives mingled "virtually" with analysts and journalists at 11 cities around the world.

"With this, you're talking about 25% of the data center spend becoming available to Cisco in a way that it wasn't before," said Cisco CEO John Chambers, speaking from San Jose, Calif.

The firm barely mentioned blade servers during a presentation that lasted almost two hours, although it confirmed that Intel's processors feature in the UCS' B-Series blade.

Rather than focus specifically on blades, Cisco is touting the rackable UCS system as a pre-configured hardware base for VMware's virtualization technology. The technology also offers links to EMC storage and server management software from BMC, it said.

"You can't think of this as a blade," said Rob Lloyd, who runs Cisco's U.S., Canadian, and Japanese operations. "It's a system -- it will be shipped as a system."

Despite all its marketing brouhaha, Cisco's first UCS offering will not be available until next month, and the firm has not yet revealed its full server roadmap.

BMC Software CEO Bob Beauchamp told TheStreet.com how his firm's software will work on Cisco's hardware.

"Our job is to provide a platform where you can very quickly provision a server and configure and change virtual machines," he said, adding that users can also control the applications running within VMs. "We think it's going to change the industry, and we're going to sell a lot of software because of this."

At a time when users are looking to drive cost and complexity out of their data centers, at least one analyst thinks that UCS is a step in the right direction for Cisco.

High levels of system and network integration are crucial in virtualized and cloud computing environments, according to Charles King, president of technology analyst firm Pund-IT Research.

"Though less refined and elegant, a wagon team is capable of greater sustained efforts and pulling far heavier loads than any single horse, no matter how fast it can run," he wrote in a note released Monday. The massive popularity and success of virtualization has fundamentally changed the competitive landscape in IT."

Cisco nonetheless dodged a tricky issue concerning the possible impact of UCS on its relationship with server giant Hewlett-Packard ( HPQ), which is also one of the firm's closest partners.

"With its Unified Computing initiative, Cisco does seem to be stretching the bounds of friendly 'co-opetition' on which the IT industry prides itself," wrote King. In fact, some have suggested that H-P's aggressive promotion of its ProCurve networking hardware is galvanizing the "California" effort.

Despite all of Cisco's hype about virtualization, not all users are rushing to deploy the technology. Analyst firm Forrester, for example, estimates that just 30% of companies have virtualized their workloads, a figure that will grow to 50% in the next couple of years.

Undeterred, Cisco is touting the system's ability to lower users' capital expenditure by at least 20%, and Chambers says that UCS could also slash data center cabling by more than 30%.

"Our cabling in our Texas facility was cut in half by this technology," he said.

The CEO, however, ducked and weaved when a French journalist asked when UCS would be a billion-dollar business.

"I always like to let products run for about a year in terms of concept and architecture before I say what is possible," he said.

Other executives explained that, including Cisco, 10 beta sites are using the UCS technology, although it would only name one of these: services firm Savvis ( SVVS).

Investors initially gave a lukewarm reaction to Cisco's server strategy, as the firm's stock retreated in line with the broader tech market Monday. The networking firm's shares closed down 6 cents, or 0.39%, at $15.45. BMC's stock slipped 76 cents, 2.56%, to close at $28.98.

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