Cisco expands into building blade servers

Chicago (IL) – Cisco is expected to unveil to unveil project California later today. It is believed to be a blade server unit combining the networking technology Cisco has been known for as well as all other components which make up a traditional blade server. The move comes as customers disappear and margins shrink. With this product, Cisco is expanding its reach and going head to head with well-established companies like Hewlett-Packard, Dell, Sun and IBM.

Cisco’s first blade servers are expected to be announced during a webcast at 10:30 am PDT today. Cisco’s chief technology officer, Padmasree Warrior, the former Motorola CTO, “leaked” the news to The Wall Street Journal over the weekend. She said, “We’re going to compete with HP. I don’t want to sugarcoat that. There is bound to be change in the landscape of who you compete with and who you partner with”.

There were no details as to which components the servers will include, but the servers are expected to be based on x86/x64-based Intel Xeon processors, Cisco networking technology and software from BMC, EMC, VMware and Microsoft.

Cisco was hit hard during the 2001-2003 dotcom bust, and now with the current world-wide economic downturn. It seems the company is looking for a different strategy.

Like the most of the IT industry, server sales have been suffering under the global recession as well. However, the blade server segment seems to be the strongest at this time. While revenue growth for blade servers has slowed, there is still some growth left, according to IDC. Factory revenue in the fourth quarter of last year increased 16.1% year over year on shipment growth of 12.1% compared to Q4 07. Total Revenue for the entire quarter was about $1.4 billion with x86 blade servers accounting for more than 85% of that sum.

HP leads the blade server market with 54.8% revenue share, followed by IBM with 21.7% revenue share. But others are catching up. IDC said that Sun, Dell, and Fujitsu/Fujitsu-Siemens “significantly outperformed” the market with year-over-year revenue growth of more than 60% respectively. For the full year 2008, worldwide blade server revenue grew 33.3% year over year to $5.4 billion.