Cisco plans big foray into server market

Economic downturn or not, Cisco Systems is going ahead with it's plan that could well result in a dramatic shake up at the datacenter. While for years the company was content to continue selling expensive network switches and routers, Cisco is poised to push into the server market, which was once left to the likes of HP, IBM and Dell.

Padmasree Warrior, the company's chief technology officer, articulates the company's vision, in her own words. "Our vision is, how do we virtualize the entire data center? It is not about a single product. We will have a series of products that enable us to make that transition," she says.

No mention of the exact nature of the product has been disclosed, though Cisco could well show off the first of the new systems as early as March. According to the New York Times though, the product is a server computer equipped with sophisticated virtualization software. Detractors are arguing that this is the wrong move, since companies selling basic servers tend to make gross margins of only about 25 percent--compared to the 65 percent that Cisco makes currently.

At the end of the day, observers think that Cisco's newfound aspirations stretch well beyond the $50 billion hardware server market. Certainly, the company is careful not to make a big deal about the management capabilities that their new products will certainly end up having, and the effect it will have on the margins of existing partners such as HP and Dell.

For more on this story:
- check out this article at the New York Times

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