Cisco May Turn Against Hewlett-Packard

Cisco's search for new revenue streams could put it at loggerheads with its buddy H-P.
Publish date:

Updated from 2:25 p.m. EDT

Cisco Systems'

(CSCO) - Get Report

long-anticipated entry into the server market is


, potentially ramping up the competition between the networking giant and its long-term partner


(HPQ) - Get Report


Cisco CEO John Chambers and other members of the company's management team will be hosting a "Unified Computing" event at the firm's New York offices Monday, which is expected to signal a new Cisco strategy.

Traditionally, Cisco has focused its energies on networking technology such as switches and


, although the firm is now seeking out

new revenue streams

. Partner H-P, on the other hand, has started to extend its own reach beyond PCs and servers into the networking arena with its ProCurve line.

"Cisco's move into servers can only succeed at the expense of H-P, Dell, IBM and

Sun Microsystems


," wrote Charles King, an analyst at technology research firm


. "Those same vendors work closely with Cisco in numerous markets andmutual customers, lending an automatic melodramatic aura to the announcement."

The first hints of Cisco's entry into the server market emerged last year, with rumors that the firm was planning to launch a

blade server

. Code-named "California Server," the device is rumored to use


(INTC) - Get Report

processors and is said to be "closely coupled" with the networking giant's Nexus switch.

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

Cisco's server strategy is also expected to boost the firm's

virtualization story

, and the company is rumored to have clinched a partnership deal with


(VMW) - Get Report


Virtualization, which has been one of the hottest technologies of recent years, allows computers to run separate yet simultaneous programs to squeeze more performance out of fewer machines.

Although Cisco has kept details of its launch under wraps, a partnership with VMware could mean that the virtualization giant's parent company



is involved. Software company



has already scheduled media briefings for after Cisco's launch Monday, suggesting that it also could be part of the mix.

Like many tech firms, Cisco has been feeling the effects of the

global economic slowdown

, and Chambers has said that he will use the firm's strong cash position to compete in new areas.

The networking specialist, which exited the second quarter with almost $30 billion in cash and investments, has little choice but to cast its net wider, according to


's Charles King.

"Self-preservation is the first rule of the IT jungle," he wrote, alluding to Cisco's changing relationship with H-P.

In addition to the

spending slowdown

, Cisco is also facing more competition in the networking space from companies like


(JNPR) - Get Report




, which recently completed its

$2.6 billion acquisition

of switch specialist

Foundry Networks


Cisco shares were down 0.4% to $15.45 in recent trading.