Cisco plans big server market push

Within the next few months, Cisco Systems, the largest maker of networking equipment, plans to release a product that threatens to shake up the technology industry and put the company on a collision course with traditional partners like Hewlett-Packard and IBM.

The product — a server computer equipped with sophisticated virtualization software — is a bold but risky move by Cisco into an unfamiliar, intensely competitive market that typically produces far lower profits than Cisco makes from network gear. But it reflects the company’s ambition to grow beyond its roots as the so-called plumber of the Internet to offer everything from instant messaging software to digital stereos.

For years, Cisco remained content to sell the switches and routers that direct the rivers of data flowing between computing systems. It dominates that market, making most of its $40 billion a year in revenue, and 65 per cent gross margins, from such products.

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