With close to $40 billion in annual sales, Cisco (Nasdaq: CSCO) really has no choice but to focus on multi-billion dollar market opportunities. And, according to a recent piece in the NYTimes, it looks like the next target is the massive server market (about $50 billion or so).
It's a worthy goal. Plus, Cisco has the credibility and distribution muscle to get critical mass.
But that's only a piece of the puzzle. After all, Cisco relies heavily on an ecosystem of partnerships. So, by moving into the server market, there's a risk of destabilizing things, especially with Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL) and I.B.M. (NYSE: IBM).
However, to keep things growing, Cisco needs to get a chunk of the server market. And the good news is that the market is undergoing a distruptive change: virtualization. Essentially, this is sophisticated technology that increases the productivity of servers. It's a powerful value proposition for cash-strapped customers.
Moreover, Cisco can put together a compelling offering; that is, by bundling networking software and tools.
It's certainly a serious threat and it's a good bet that HP, Dell and IBM will respond. In fact, one idea is to buy up networking operators – which will likely spur a new round of consolidation in the tech space.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
1-26-2009 @ 9:17PM
chan said...
Will Cisco be able to survive on this market? This is a traditional low margin hoigh volume business. What will be the strategy that Cisco will employ if HP, Dell and IBM also enter into 'Virtualization' software? We need to wait and see. With $26 billion in cash, CSO can flex its muscles to acquire technolog and companies to survive and grow leverage on this competitive. LEt us see.