Cisco is ready to aggressively enter the server market

The product is a server with sophisticated virtualization software, a bold move by Cisco to venture into unfamiliar, competitive and low-margin markets, but it reflects the ambition of Cisco to extend beyond its traditional main business. Over the years, Cisco's network devices such as the main connector and router market, the annual revenue of 40 billion U.S. dollars, gross margin of up to 65%. Including HP, IBM and Dell and other major hardware vendors, with the company for many years to maintain a good, mutually beneficial relationship, products rarely overlap. Industry experts say Cisco's foray into the server market will disrupt that stable symbiotic relationship and may make the big tech companies burst into all-out battle over customers. "This will be the most important and topical product of the year," said Brent Bracelin, Pacific Crest Nomura hardware analyst. Both IBM and HP will have a massive competitive response, which we expect will lead to a new round of industry consolidation. "We don't think of it as a new market, but as a market shift," says Padmasree Warrior, chief technology officer, who has a relatively low-key attitude. Any time a major shift takes place, large companies will have to compete in some areas. "and Cisco believes that the main technology driving this shift is virtualization software." The new tool developed by VMware, which allows commercial software to move through all the computers in the data center with the help of a mouse, breaks the traditional, linear link between the host computer, storage system and network hardware, and expands the impact of virtualization software on the overall business system. Cisco is looking at this business opportunity, the future customers will be a single overall management of their data center, but no longer a separate unit. Cisco, in turn, must occupy the central position of the market as much as possible. Cisco's expansion targets not only the 50 billion dollar server market, but also management software and even storage equipment. "Our vision is how to virtualize the entire data center," Warrior said. "It's not just a single product, we're going to have a series of products to make this transition." "The first part came out as soon as March, and Cisco declined to disclose the exact nature of the product, but people familiar with the company's plans revealed that it would be a server, tying up network hardware devices and virtualization software developed by VMware and Cisco." Cisco owns nearly 2% per cent of VMware, the largest shareholder of which is EMC. Cisco's involvement in the server market is fraught with risks. Network Equipment has a gross margin of 65%, while the average server gross margin is only 25%. Signal Hill analyst Erik Suppiger said: "It is a challenge for Cisco to raise the gross profit margin of new products to the same existing products." "Analysts estimate that Cisco can only raise the server's gross margin to 50% per cent, a figure that, together with the initial performance of the new business, may be more mundane and should not affect Cisco's recent financial performance." But analysts believe that the server business will eventually reduce the company's overall profitability. More notably, Cisco and its longtime allyRelationship。 Bracelin that IBM and HP would consider acquiring new companies to develop products similar to Cisco's new system. They may also transfer their business to other network equipment providers, such as Juniper NX and brocade. Cisco has denied that it wants to go to war with its partners, saying the company is only adapting to technological changes and other companies will do the same. "There is a bit of tension in some areas and I'm sure other large companies will do the same," Warrior said. "Cisco has torn its face in collaboration with the software market and with another longtime partner, Microsoft. In addition, the company is also looking for opportunities in the consumer sector to launch home networking equipment products. Analysts point out that Cisco, with cash as high as $27 billion trillion, may use the acquisition of VMware or even buy the entire EMC, more in-depth information center market. "Everyone is aiming for the same future goal, and when they become bigger, inevitably their fields overlap more," says James Staten, a Forrester analyst. ”