HP ProCurve

HP-3Com acquisition hits Cisco the one place it hurts

The gloves are off in the Cisco-HP battle. HP’s move to acquire 3Com hits Cisco in one of the few places it really hurts – China.

3Com controls 32% of the Chinese networking market (with $700 million in revenue) and has held Cisco at a dead heat there – something no other networking company has been able to do in other markets. If the acquisition goes through, HP would have a tighter grasp on that market – and a more complete portfolio with which to battle Cisco globally.

“I think this is 75% about geographic market acquisition (in China in particular) and 25% about product acquisition,” said Robert Whiteley, a Forrester Research director.

On the technology front, HP’s ProCurve chief Marius Haas said the acquisition would give HP an “edge-to-data-center core” portfolio and he promised barely any overlap between the two product lines.

That, in fact, won’t likely be the case since both have extensive and similar switching lines.

A more likely scenario is that HP – which has the most successful edge switch in terms of sales – will scrap its own core switching line, replacing it with 3Com’s H3C product.

“ProCurve built its own core switch a few years back, but it wasn’t gaining a lot of traction. With 3Com they get a much more scalable switch that is a better fit for high-end datacenter and cloud networking initiatives,” Whiteley said.

3Com will also bring a router story to the table.

“ProCurve never really had routers, so the H3C assets will help here again. I don’t think this is as big a deal, since the majority of enterprise refresh is on L3 switches, which are more relevant in the datacenter, and where Cisco doesn’t have quite the stranglehold it does on router,” Whiteley said.

The companies would not say Wednesday which, if either, of the ProCurve or 3Com H3C labels would be shuttered. Either way, the core and edge networking components would obviously be coupled with HP’s data center servers, giving Cisco a run for its money on that front too.

The two companies also swung at Juniper Networks, which consistently sells its components on being more economically efficient in operating costs because they run on one joint operating system – JUNOS. 3Com’s components were also engineered in-house and therefore share one operating system, said 3Com President and COO Ron Sege said, adding that the motto on the OS is, “Learn once and support many.”

In the same breath, Sege also promised that 3Com and HP together would provide networking equipment that wouldn’t be proprietary like Cisco’s causing vendor lock-in. It’s difficult, however, to sell a portfolio on having a joint OS if users aren’t being asked to buy into a one-vendor system.

3Com also brings its Tipping Point security line to the table, which brings HP in line with Cisco and Juniper on that front.

The acquisition is pending regulatory review.

Oracle isn’t after Brocade, but what about Extreme?

Oracle CEO Larry Ellison dismissed the Wall Street Journal’s speculation that his company (among others) was interested in buying Brocade while speaking at the comapny’s annual shareholders meeting yesterday, according to MarketWatch’s John Letzing, IBM, HP and Juniper remain potential suitors according to the Internet rumor mill.

Meanwhile, Extreme Networks’ stock price took a relative beating on Tuesday after it lowered its earnings for its first fiscal quarter (which ended Sept. 27). Wall Street analysts were expecting Extreme to make $80.4 million but Extreme says it will be closer to $66 million. Extreme cited supply chain problems, which should scare customers. Other networking vendors have admitted to supply chain problems in the wireless LAN market, but I haven’t heard anything about wired networking supply chain problems before. Extreme said it has lost some deals and had other delayed by the problem. Are Extreme’s suppliers giving preference to larger networking vendors?

Extreme’s market capitalization is at $231 million as I write this. It would come a lot cheaper than Brocade and would offer someone like HP ProCurve a nice complementary line of data center switches.

HP or Juniper to buy Brocade?

A year ago Brocade was a buyer. Now its a seller and HP or Juniper might be buying.

Citing unnamed sources, The Wall Street Journal reported yesterday that Brocade Communications has put itself up for sale. This news comes less than a year after Brocade closed on its own acquisition of Foundry Networks, a $3-billion deal which gave the Fiber Channel storage networking market leader a broad portfolio of high-performance Ethernet switches and a variety of other data center networking products. Brocade has since inked some high profile OEM agreements with companies like IBM, creating a promising sales channel for the Ethernet products.

The Journal reported that HP and Oracle were likely suitors for Brocade. Oracle seems like a strange fit, but HP makes sense, given that Brocade’s former Foundry switches would fill a gap in HP’s ProCurve switching portfolio. ProCurve lacks a track record in high density Ethernet switches, something Foundry specialized in. The deal would also boost its storage business and give HP a much broader overall suite of data center products.

Now Journal blogger Michael Corkery speculates that Juniper might be a buyer for Brocade, too. Known more for its service provider routing business, Juniper recently rolled out its own line of enterprise Ethernet switches, but it has $2 billion in cash. A Brocade acquisition would give Juniper a much more established switching business, plus a lucrative storage networking business with deep and successful partnerships with IBM and EMC.  But Juniper’s stated switching strategy is centered around the concept of having one operating system, JUNOS, across all of its networking products. Buying Brocade would force a complete change in direction.

Cisco launches blade switch just weeks after HP ProCurve

Two weeks ago HP ProCurve launched a new line of blade switches, the 6120XG and the 6120G/XG, which plug into the same blade enclosures as HP’s BladeSystem servers. These switches were meant to replace the switches which HP OEMs from a third party, most likely Blade Network Technologies’ BNT switches.

Now Cisco has launched the Nexus 4000, a blade switch which also fits inside a blade server enclosure. Like other switches in the Nexus family, the Nexus 4000 runs the NX-OS operating system, which Cisco designed for converging LANs and storage-area networks (SANs). The switch is also designed to support converged, data center Ethernet, the pre-standard technology that will allow data centers to run server and storage traffic across the same wire.

Although the Nexus 4000 is part of Cisco’s Nexus switch family, Cisco is only selling it through OEM channels, specifically blade server vendors. These are the same server vendors that Cisco now competes against with its Unified Computing System, a line of data center technologies which includes blade servers.  It remains to be seen how enthusiastic vendors like IBM and Dell will be about selling a switch from a server competitor with their blade server systems.  I doubt HP will be interested, given that it just launched a similar product.

Brocade continues to exploit friction between Cisco and systems vendors

It’s debatable just how much Cisco’s move into the server market with its launch of the Unified Computing System (UCS) has truly soured the networking giant’s strategic alliances with IBM and Dell, but Brocade has wasted no time in exploiting whatever separation may arise as a result.

Cisco’s UCS strategy banks on the need for tight integration between servers, storage and networks in next-generation data centers, particularly those that use a unified fabric, such as converged Ethernet, to transport all forms of data center traffic on a single medium. Cisco see an opportunity here, believing that many enterprises will want to get all their data center equipment from a single vendor in order to build such a highly-integrated infrastructure.

Of course, as part of its plan to exploit this potential market, Cisco has introduced its own line of servers, putting it into direct competition with long time allies in the data center, such as Dell, HP and IBM.

Whatever rift that forms between Cisco and these server vendors is an opportunity for Cisco’s networking competitors.

In the year since the storage networking company Brocade bought Foundry Networks, it has been leveraging its existing partnerships with leading IT equipment vendors to expand the market for its newly acquired Ethernet switching business. Apparently vendors like IBM and Dell are only too eager to find an alternative networking partner.

Earlier this year IBM announced a major expansion to its OEM relationship with Brocade. Big Blue had been selling IBM-branded storage networking gear from Brocade for several years, but in the new deal it expanded that OEM relationship to include a broad range of former Foundry switches and routers.

And now yesterday Dell announced that it is expanding its own OEM relationship with Brocade, from a storage networking channel to a broad line of Brocade’s Ethernet products.

Dell also announced it would start reselling products from IT automation vendor Scalent Systems. This is all part of an “Efficient Enterprise” offering Dell plans to unload on the market toward the end of 2009. As a result of these new OEM deals, Dell can now offer enterprises servers, storage, networks and IT automation software in one deal, enabling enterprises to buy an integrated data center solution from one vendor. IBM is making a similar move with its OEM agreements and its consulting arm. HP is moving swiftly in this direction, too, but it has the advantage of possessing its own, rapidly growing network equipment division in ProCurve.

Cisco matching ProCurve prices

The rivalry between HP ProCurve and Cisco continues to heat up. According to a leaked email from ProCurve, Cisco has been telling its channel partners to match any price that ProCurve offers.

ProCurve appears to be welcoming this. According to the email, ProCurve will publicize Cisco’s pricing scheme. The rationale? ProCurve figures that as more Cisco customers hear about this tactic, more of them will come to ProCurve for a price quote. At the very least, this will give ProCurve a chance to show Cisco customers what it has to offer. It will also cost Cisco a lot of money, since ProCurve generally offers much lower prices.

So the key takeaway here is - if you’re a Cisco customer and you’re looking to refresh part of your network, go talk to ProCurve and see what kind of price it can offer. Even if you decide to stick with Cisco, you’ll at least have a chance at getting a better price from your incumbent vendor.

Wireless LAN spending is down, 802.11n spending is up

Market analyst firm Dell’Oro published a 1st quarter assessment of the wireless LAN market which showed that a severe 11% drop in enterprise spending from the 1st quarter of last year and a 15% drop from the 4th quarter of 2008.

Dell’Oro says Cisco’s huge share shrank a little, from 63.1% to 60% from a year earlier. HP ProCurve doubled its share from 1.7% to 3.1%, no doubt thanks to its acquisition of WLAN vendor Colubris. Aruba’s share is 8.1% and Motorola’s is 5.9%.

Despite the overall poor showing for WLAN, 802.11n technology sales grew 4% from the 4th quarter of last year, according to a report from PCWorld.  and 802.11n technology now makes up the majority of the WLAN sales for the first time ever.

Cisco’s domination in the wireless LAN market remains intact, but it’s interesting to see their share shrink just a little bit. In fact, looking at the numbers, the amount of market share Cisco lost equals ProCurve’s ENTIRE market share.

The WLAN market remains extremely crowded and some of the largest network infrastructure vendors not named Cisco (Brocade, Juniper) lack a true WLAN product line. I expect to see some more consolidation before the recession ends.

Aruba Networks joins lifetime warranty club

Aruba Networks announced this morning that it will now offer lifetime warranties on all its indoor wireless LAN access points. This will provide some nice investment protection to customers. It’s pretty clear to me that the lifetime warranty approach that HP ProCurve has adopted is going to rub off on other other networking vendors who are vying for share of the market that Cisco hasn’t locked up. It’s also possible that Aruba is recognizing that ProCurve is now a serious competitor for WLAN business in the wake of its acquisition of Colubris last year. ProCurve extended its lifetime warranty approach to Colubris’ entire product line after it closed the deal for the company.

Cisco plans to enter 50 new markets: acquisitions inevitable

BusinessWeek reported yesterday that  Cisco is poised to make several acquisitions as it continues to diversify. The magazine noted that Cisco now competes in 30 different markets, many of them courtesy of acquisitions, such as Pure Digital, which gave Cisco a new toehold in the “Flip” video camera market. In an interview with BusinessWeek, Chambers said Cisco will enter 50 new markets within a year.

One of those markets, of course, is blade servers. Cisco announced its new Unified Computing System this spring, putting it in direct competition with companies that it has historically partnered with: IBM, HP and Dell. BusinessWeek noted that IBM alone sells about $3 billion worth of Cisco’s network technology through its consulting services.  Since rumors of Cisco’s move into servers started spreading, IBM has since increased its ties to Cisco’s networking rivals. It has partnered with Juniper on its Stratus cloud computing project and it announced an OEM agreement to sell IBM-branded versions of Brocade’s Ethernet switching and routing gear.

One analyst, Sam Wilson of JMP Securities, told BusinessWeek that the souring relationships between Cisco and the consulting arms of HP and IBM could force Cisco to develop its own consulting services. He said: “If push comes to shove” Cisco could simply buy Accenture, one of the biggest consulting firms on the market.

Cisco doesn’t seem to be shy about making such a sizable acquisition, either. Cisco’s mergers an acquisitions chief Ned Hooper told BusinessWeek that Cisco could easily afford a $10 billion deal right now. It has $33 billion in cash. But Hooper went on to say that Cisco will focus on smaller deals for now.

More networking acquisition rumors for HP

Bloomberg News is reporting that HP may make an acquisition soon to counter Cisco’s move into the server market. Shaw Wu, an analyst at Kaufman Brothers, an investment bank and broker that specializes in the technology sector, told Bloomberg that Brocade and Juniper are two potential targets, along with storage vendor NetApp.

Bloomberg framed the potential acquisitions in terms of triggering revenue growth because one of HP’s bread-and-butter markets, PC sales, is contracting the the recession. However, picking up Brocade or Juniper would have tremendous strategic value for ProCurve, HP’s networking business.  ProCurve is generally perceived as the number two network switching vendor, but it lacks one key element from its portfolio: high-density, high-density 10/100 Gigabit Ethernet switches. Juniper’s young family of EX switches would help HP ProCurve take a big step forward toward filling that gap.  Brocade’s line of high performance switches, which it acquired with Foundry Networks last year, would also be an ideal fit.

Acquisition speculation has surrounded HP’s ProCurve business for months, ever since HP put a renewed focus on building up its networking business to compete more directly with Cisco. Cisco’s announcement of its Unified Computing System servers has only intensified the conflict between HP and Cisco.  Brocade and Juniper would be two rather large acquisition targets for HP. If the company wanted to acquire 10/100 GbE expertise on the cheap, it could target some of the smaller high-performance networking vendors on the market. As GigaOM noted several months ago, Arista, Blade Network Technologies or Force10 would make a lot of sense.