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Summary:

Update: Last week Cisco announced its move into the data center (something Om prophesied a year ago) with what it called a Unified Computing System that will compete with offerings primarily from HP and IBM. A few days later, rumors circulated that IBM might buy Sun […]

Update: Last week Cisco announced its move into the data center (something Om prophesied a year ago) with what it called a Unified Computing System that will compete with offerings primarily from HP and IBM. A few days later, rumors circulated that IBM might buy Sun Microsystems for $6.5 billion (or that maybe Cisco should). And as these tech titans fight for supremacy of the data center, at least one analyst firm believes the end result will be even more M&A.

The way it’s likely to play out is Cisco will strive to look more like HP and IBM, while they in turn may seek to look more like Cisco, with its networking focus. A UBS report issued yesterday offers a rundown as to how this all may happen.

Networking: If IBM and HP want to take Cisco on its own turf, Juniper Networks and Brocade are listed as possible targets, with IBM likely to drift toward Juniper on the basis of an existing partnership with the Cisco rival.  HP could pick up Brocade and broaden its existing ProCurve local area networking switching business with Brocade’s strong storage area networking switching products.

Storage: Here’s where Cisco will try to mimic IBM and HP’s existing storage businesses. NetApp, a current Cisco partner, and the big fish in the storage pond, EMC, are both potential buys (with EMC, Cisco might get its virtualization partner VMware, too). UBS thinks a NetApp deal is more likely simply because it’s smaller. We think EMC is a bit too much for Cisco, too.

IT Services: If Cisco wants to run with the big boys it would be well advised to pick up a services business. In light of its partnership with Accenture thanks to its new server launch, that company seems like a decent bet, although it’s currently too rich for Cisco’s roughly $7 billion in domestic cash holdings ($4 billion of which is debt.)

Software: The UBS report names BMC Software as a plausible acquisition target for Cisco. BMC would round out Cisco’s data center strategy against HP’s OpenView and IBM’s Tivoli management platforms. But BMC is already a partner with Cisco, an arrangement from which it stands to gain a lot. So if you’re Cisco looking at paying a premium on BMC’s $6 billion market cap, why buy the cow when you can get the milk for free?

Update: Virtualization: With Cisco creating a tight partnership with VMware as part of its new data center push, Citrix gets the nod because of its ownership of XenSource, the creator of the open-source Xen hypervisor — a VMware rival. The report assumes that Citrix’s tight relationship with Microsoft means that HP, which also has good relations with Microsoft, would be a more likely buyer than IBM.

  1. So Microsoft does not get to play? Or you think it is not in their DNA.

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  2. IBM and juniper are already partners… What would IBM gain of acquiring Juniper…?

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  3. Hi Stacey: Do you have a link to the UBS report?

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    1. Stacey Higginbotham Tuesday, March 24, 2009

      It’s not something that is online, unfortunately.

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  4. Habib Ullah Khan Tuesday, March 24, 2009

    I dont know what to say honestly so I’ll say something unoriginal.

    The server and networking lines you talk about are yesterday’s battles. We are now talking about what computing will look like in the future. We are obviously standing on a shift as major as when DC architecture’s started moving away from Mainframes.

    I’d like to see GigaOM tell me what the new world looks like instead of teaser trailers of the M&A Trilogy with legendary superheroes duking it out for supremacy of Acme-Gotham city!

    A few perspectives to start off that train of thought. Cisco has not declared war on the server market, its extending its footprint in networking to include the smallest but fastest growing piece of that pie, the virtualized server niche. This is not a desperate move by John Cambers because he as promised Wall Street growth and has no choice but to take on former partners. It is one more step in the Cisco evolution of selling hardwares in the DC1.0 era to figuring out what will be its SAAS strategy that will lead the entrie company’s strategy. The Unified Computing announcement should be seen in line with its consumer play, its decision to move its Services team to Banglore and its social networking acquisitions. There’s a story there. I’m just not smart enough to figure it out!

    Similarly IBM’s Eclipse and Sun’s Java team getting together is as monumental as the everyone ganging up on Bonaparte. There are non server angles to that story and they are the sharpest ones. I’m damn sure its about the Cloud somehow too….

    Let’s get on it and figure this out. Its beginning to get murkier then a paramecium pond warming party.

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    1. Stacey Higginbotham Wednesday, March 25, 2009

      Habib, I’ve been thinking and talking to people about Cisco’s overall company story for a while. At the 10,000 foot view if you consider the future of computing as the cloud between content providers (be it movies or business software) and consumers, then Cisco so far wants to have the equipment for the cloud and is slowly trying to control the endpoints in the home. From Layer 1 all the way to Layer 7 the network will run through all of these services and Cisco wants to make sure folks who have Cisco gear all the way down that stack get better performance. It’s the details and holes they have that I need to start thinking about.

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      1. Habib Ullah Khan Wednesday, March 25, 2009

        I think you are right. And I think if ONLIVE works out Cisco may very well buy that!

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  5. $7bn in cash? Don’t you mean…$30bn?

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    1. Stacey Higginbotham Tuesday, March 24, 2009

      They do have about $33 billion in total cash. I pulled the $7 billion from the company’s domestic cash cited in the report as a potential limiting factor for acquisitions. I should have explained.

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  6. Citrix “owns” Xen? It’s like saying Red Hat owns Linux…

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    1. Stacey Higginbotham Tuesday, March 24, 2009

      Misha, it owns XenSource, but you’re right. I’ll clarify in the story.

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  7. Seems like if ACN is too expensive, there are others out there. SAY is damaged but I’d imagine still has decent operations infrastructure.

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  8. I understand that need of companies to grow their services, products and revenue but let’s not forget there is the other side of increased risk, losing focus on core competencies and failure of integration. Big ships can never turn on a dime!!!!

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  9. [...] and IBM tap partners for acquisitions Jump to Comments Gigaom is reporting that  both Cisco and IBM are looking to current partners as acquisition targets in the escalating [...]

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  10. [...] may further enhance our earnings outlook.” (Related Posts: How HP can fight Cisco & Win; Cisco’s Data Center moves to spark M&A) [...]

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