Summary
Cisco jumped into the enterprise server space with the introduction of its Unified Computing System (UCS). Now it is competing against its former partners IBM and HP. Did Cisco under estimate the fallout?
Analysis
In March, 2009, when Cicso announced its entrance into the enterprise server market, Cisco broke through the traditional barriers that existed between the network vendors and the server vendors. Many speculated that Cisco might have gone too far ('Cisco Steps on Server Giants' Toes'). The biggest projected impact would be on major Cisco sales partners IBM and HP.
Cisco's move was not unexpected. In fact, the push-me/pull-you between Cisco and HP had been yanking back and forth for years. HP wanted to enter the home networking market and Cisco balked. HP avoided emphasizing some of its products to avoid irritating Cisco which purchased well over $500M in equipment from HP.
HP is not all innocent in this game. HP had been prepping for a long time to move into many territories that could have been construed as Cisco's. The expansion of the ProCurve line with the acquisition of Colubris started to show HP's cards and Cisco undoubtedly started to twitch.
Undoubtedly, the acquisition of EDS by HP brought home to Cisco the need to quickly get into the IT infrastructure and enterprise server markets. Otherwise, Cisco would be partially stuck in the same tar pit that is crushing Nortel and has had a strangle hold on many other telecom equipment providers. Cisco had to move and move fast or be left behind as an also ran in the enterprise solutions space.
The Alcatel-Lucent(ALu)/HP ten year agreement is a great deal for HP. Even without many details, it is obvious that the HP/EDS group will be doing a major overhaul of the Alcatel-Lucent data centers and EDS will be absorbing ALu staff. HP will also benefit from the expanded offerings of ALu's products and exposure to major ALu customers.
I think Alcatel-Lucent got the short end of the stick in the agreement. The volume of sales from the HP alliance will likely be small, and there are lots of very good competitors in the product areas that Alcatel-Lucent is bringing to the agreement. But, it's better than emulating Nortel.
