Cisco launches Unified Computing push with new blade server

Ambitious new direction for the networking company is a big risk, say analysts (see video below)

1 2 Page 2
Page 2 of 2

Ader said Cisco will also need to adjust to seeing a tremendous drop in the gross profit margin it makes on switches with the new UCS. He said an average Cisco switch commands a 70% gross profit margin, while UCS and the new server might be half that much.

Zeus Kerravala, an analyst at Yankee Group Research Inc., said there will be a risk for Cisco, which has long been regarded as the leading switch and router maker. Kerravala said that Chambers has called Cisco's entry into servers and computing his riskiest move as head of Cisco for nearly 20 years.

"It really is risky," Kerravala added.

IBM and HP haven't overlooked the importance of networks in controlling data centers. IBM has aligned with Cisco rival Juniper Networks Inc. in a broad strategy called the Stratus Project, and HP is expected to increasingly tie its growing ProCurve networking business in with its computing offerings.

Cisco has pushed to bring more functions into the network infrastructure for several years, including security, application optimization and adaptation of multimedia to fit different clients and purposes. As revenue growth from its core routing and switching businesses slows, the company is aggressively branching out into new areas, including consumer electronics and its TelePresence high-definition videoconferencing product line.

Information from the IDG News Service was included in this report.

Copyright © 2009 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon