2010: The War of IT has Begun; Cisco delivers blow to HP

In school, we are taught important dates or periods within history.  I’ll never forget a history professor asking, “who fired the first shot?” in the American Revolution or detailing the sinking of the Lusitania by the Germans.   Within the history of high technology, yesterday’s announcement by Keith Goodwin, Vice President Cisco’s Worldwide Partner Organization, is such a date.  With one statement, Cisco changed the IT landscape as they ended a lucrative and important relationship with HP by failing to renew HP’s System Integrator Contract that strips HP of being a Cisco Certified Partner and Reseller.

Effectively, HP is now on the outside looking-in at Cisco’s Empire.  HP loses access to Cisco’s proprietary information including product roadmaps and reseller initiatives.  Additionally, Cisco no longer offers HP “protection” as they begin to untangle their complicated business relationships including software and hardware sales.  While HP may believe they are prepared for this action, competing against Cisco head-to-head is very different from maintaining a competition/cooperation arrangement; yet HP is very different from past competitors.

With HP’s size and market power, are we poised to answer the question, “What would happen if an unstoppable force strikes an immoveable object?”  HP has amassed a powerful software and hardware portfolio via acquisition and partnerships.  Also, HP has something Cisco needs, a large, growing, and competent services division (EDS).

Of course, Cisco counter’s EDS with their relationship with IBM but how long will that last?  After-all, IBM is in a similar position as HP with one intriguing difference; IBM is not a network equipment manufacturer (yet).  Can Chambers convince Palmisano to maintain the status quo?  Or do they look beyond partnerships to acquire Juniper, Brocade, or perhaps ZTE to fill their product holes.  Would Palmisano stand for Cisco acquiring a services company?  Or, would that be the final straw that opens a new flank in the war against Cisco.  What would happen if Cisco purchased Liquid Computing or the new SGI?

Finally, let’s not forget Larry Ellison and Michael Dell.  Oracle didn’t just spend billions of dollars on SUN to sit on the sidelines.  Oracle now sports an impressive list of hardware and software assets especially in the realms of file systems and virtualization.  Meanwhile, Dell has opened up their pocketbook and has entered into the services business while radically expanding their relationship with Juniper.

Look for three things to happen:

  1. Heightened M&A Activity (large and small)
  2. Heightened Partnership Activity and Alliances
  3. The rise of an unexpected and/or new competitor

We are watching history in the making as its; Chambers vs. Hurd vs. Palmisano vs. Ellison vs. Dell vs. Klayko vs. Jonhson vs. ?

2010: The War of IT

Rackable a Takeover Target?

Rackable quietly purchased SGI from bankruptcy court for a mere $42.5 million. It’s a sad end for SGI, a once great computing pioneer that missed the x86 and Window’s revolution. For Rackable, this gives them access to SGI’s high performance computing products and research and development in the areas of power, cooling, visualization, and storage.

While Rackable is known for their servers and storage portfolio, they have entered the world of green datacenters with their Eco-Logical chassis. As the datacenter market is rapidly changing, the competitive walls are surely closing-in on Rackable. After-all, who would expect Rackable to survive a battle against Oracle, Cisco, HP, and IBM? At least that’s what the big boys want you to think.

Rackable’s portfolio compares quite favorably to the others in the marketplace; albeit without the marketing and services flash of their larger rivals. Additionally, Rackable has some unique products with their CloudRack and CloudRack C2 product lines achieving remarkable density and power/cooling ratios. Heck, Rackable even overs a data center in a container (ICE Cube).

It seems to me with all these goodies, Rackable is a legitimate takeover target. As of this posting, their market cap is around $161 Million. That’s a far cry from the billions Oracle Spent on Sun or Dell’s current $23 Billion valuation. If Brocade, Juniper, Siemens (Extreme Networks), Adtran, Turin, or more wanted into the “unified computing” space, then why not Rackable? Or, does private equity / venture capitalist firms show some vision and combine the assets of several companies together to create a viable challenger to Cisco, HP, and IBM?

M&A speculation is always a fascinating discussion, but for now I’ll say goodbye to a once great visionary company (SGI) while tipping the cap to Rackable for taking advantage of the current economic state of affairs.