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The Wall Street Journal — Business Technology

December 12, 2008

Cisco Pushing Further Into the Data Center

by Bobby White

Cisco Systems Inc. has long occupied its own niche, supplying routers and other devices that complement the server systems sold by companies such as Hewlett-Packard Co. and International Business Machines Corp. That picture may soon change.

Cisco is taking a stab at the blade-server business

Some industry executives in Silicon Valley say that Cisco next year will introduce its first product that competes with those of big computer makers-a blade server system, code-named California, that is expected to combine networking hardware with virtualization software and storage systems.

A Cisco spokeswoman declined comment. But one person who says he has seen the Cisco device is Vikram Mehta, chief executive of Blade Network Technologies, which also manufactures data center hardware. He thinks the product will create tensions with companies such as HP and IBM, who have been Cisco partners but could turn into tough competitors.

“I think it’s foolhardy to undermine the strengths of those two companies,” says Mr. Mehta. “They’ve spent decades building up strong relationships with customers. This is a formidable hill for Cisco to climb.”

Behind the scenes is a trend requiring computers and other hardware to work better together. As large businesses and Internet companies such as Google and Yahoo look to foster a greater dependence on services and software accessed over the Internet, the trend has created systems that are difficult to manage and monitor. Such customers want equipment that has long been separate-like storage, computing and networking hardware-to operate much more cohesively.

Cisco has already offered new software and hardware this year to help unify those systems. Its blade server could further advance that push.

“What’s clear is that there is an emerging shift in the data center,” says Jayshree Ullal, chief executive of Arista Networks, a networking and data center start-up. “The boundaries are not as clear between data center vendors, creating much more competition than in the past.”

Ms. Ullal, who recently left Cisco after running the company’s data center business to head up Arista, says some hardware makers have chosen to collaborate to make their products work better together. Cisco seems to be going at things much more independently, she says.