Daily Archives: August 4, 2009

IBM and HP Respond DIfferently to CIsco’s Data-Center Challenge

Back in June, as recounted in a Wall Street Journal article published online earlier this evening, JMP Securities’ Sam Wilson speculated that IBM’s recent manufacturing agreements and software acquisitions “appeared to signal a shift away from hardware.”

He went on to suggest that IBM “will continue to sell large quantities of Cisco gear,” and that IBM does not want “to enter a full-fledged war against Cisco the way that H-P has thus far.”

Unlike IBM, HP owns a networking business, its HP ProCurve group, and it has been competing increasingly against Cisco, particularly at the network edge, for some time.

For its part, IBM, which typically takes a services-led approach to its customer engagements, resells and OEMs a range of networking equipment, including products from Juniper, Cisco, and Brocade.

In the context of Wilson’s commentary, a dispute has arisen as to whether IBM is “moving away from hardware.” IBM representatives say that’s not what the company is doing.

Strictly speaking, IBM’s spokespeople are correct. The company manufactures and sells its own server hardware, and, as Crawford Del Prete of International Data Corp. notes, as long IBM can take profits from that hardware portfolio, it will continue to make and sell servers.

As of today, IBM has differentiated data-center hardware, and it’s selling that hardware into customer accounts. In the near term, that approach won’t change.

That said, I don’t doubt that IBM has set a strategic course for the future that will deemphasize hardware in favor of software and services. Hardware will still be included in IBM’s data-center solutions, obviously, but that doesn’t mean IBM will continue indefinitely to manufacture those products itself.

Cisco isn’t a major presence in servers today, but its Unified Computing System servers will gradually gain traction in many accounts that already look to Cisco for networking gear from the routing core to the wiring closet. Cisco has signaled its intentions, and it will not go away. The competition for data-center real estate will be fierce, and Cisco will scrap for every inch of exposed ground. Cisco wants its “fair share,” which means as much as it can get without violating antitrust laws.

HP, as Wilson says, has decided to match Cisco stride for stride, product for product. For HP, there is no middle ground, no room for accommodation or compromise. As an HP representative informed a Wedbush analyst, “We have declared war on Cisco.”

Wilson is also correct in saying that IBM is not taking the bluntly antagonistic approach to Cisco that HP has espoused. IBM, I think, has decided on a course that plays to its strengths, not to those of its adversaries.

Compared to most vendors, IBM is very good at giving enterprise customers what they want. If that means IBM must lash together a mix of servers, storage, networking gear, plus various layers and types of software, then so be it. IBM can wrap professional services around everything and make it work, still managing to come away with a tidy profit and an ongoing revenue stream.

HP acquired EDS, and it could conceivably play the same service-driven cards that IBM wields so adeptly. Not really, though. EDS is still new to HP, the HP culture remains oriented toward engineering and products (despite attempts to change it). As a result, HP does not have the same range of options that are available to IBM.

IBM could change tack, I suppose. It could decide to buy a major networking-equipment player – say, Juniper – make some smaller point-product networking acquisitions and completely reverse field, challenging Cisco head to head, just as HP has decided to do.

I wouldn’t bet heavily on it, though. From IBM’s perspective, that would be a path fraught with great risk and uncertain reward. There’s much that could go wrong, and only a modest probability of everything falling perfectly into place.

IBM remains a server-market leader, and it will manufacture and sell its own servers as long as it makes business sense to do so. When it doesn’t, IBM will simply resell somebody else’s servers. It will still have its services, its software, and its relationships with various networking vendors, perhaps even one with Cisco.

CommVault Posts Solid Quarterly Results Amid Dell Rumors

CommVault shares are up in after-hours trading tonight after the information-management software company posted Q1 FY10 results that exceeded analysts’ revenue and earnings expectations.

Excluding certain items, CommVault posted adjusted first-quarter earnings of 15 cents per share, surpassing expectations by five cents. Revenue was up 10 percent over the comparable quarter last year, reaching $60.2 million. Consensus estimates from Reuters were for revenue of approximately $58 million.

CommVault’s shares have risen more than 35 percent in the last three months, mainly on the basis of the company’s performance but also, to a lesser extent, as a result of acquisition rumors.

After buying and successfully integrating EquaLogic, an iSCSI storage-systems vendor, Dell is rumored to be ready to make another acquisition in the storage space. As a SearchStorage article noted more than two weeks ago, CommVault meets most candidate criteria for a Dell acquisition. In my view, of all the companies listed in the SearchStorage piece, CommVault and GlassHouse Technologies are the likeliest targets for Dell.

Dell and CommVault already have an existing relationship and seem to work well together.

In June, CommVault announce a strengthened global OEM partnership with Dell through the introduction of the Dell PowerVault DL2000, powered by CommVault Simpana 8 software. The joint all-in-one, disk-based offering is designed for small and medium-sized businesses (SMBs), a market segment where Dell competes effectively and still has room to expand its presence.

Facebook Ranks Fourth Among Most-Visited Websites Globally

Facebook has become the fourth-most-visited website in world, according to an article published at TechCrunch.

Quoting the latest site-vistor data from comScore.com, TechCrunch reports that Facebook gained 24 million unique visitors in June, giving it a total of 340 million visitors worldwide.

In the popularity contest as determined by site visits, Facebook is behind sites belonging to Google, Microsoft, and Yahoo, respectively, but finds itself ahead of the likes of Wikipedia, AOL, eBay, and CBS Interactive.

You know what I think of Facebook. Not for the fist time, I am gobsmacked by popular taste.

Anticipation Builds for Cisco Q4 2009 Results

After trading ends tomorrow afternoon (ET), Cisco will announce its financial results for the fourth quarter of its 2009 fiscal year.

The stock has traded upwardly for the past month amid rising expectations about the macroeconomic climate, the presumed bottoming out of the computer-networking space last quarter, and Cisco’s relatively strengthened position in many market segments in which it competes.

Cisco, it goes without saying, is a technology-market bellwether, so its results and forecasts — like those of Intel, IBM, HP, Microsoft, and now Google — are carefully scrutinized by market sages and fools alike.

Analysts polled by Thomson Reuters expect Cisco to post earnings of 28 cents per share on $8.5 billion in revenue. Cisco has said it expects sales to be down 17 percent to 20 percent from a year ago, which corresponds to a range of $8.3 billion to $8.6 billion.

Many analysts think Cisco will surpass those numbers, if only slightly. They are looking for earnings just above 28 cents per share, perhaps bolstered by cost controls and lower operating expenses, and for revenue reaching the higher end of estimates.

A key to how the market reacts, as always, will be the guidance provided by Cisco CEO John Chambers and his executive team. Analyst and investors will be listening closely to the tone as well as the substance of what is said. Sentiment – Is the market coming back and, if so, how much? – will be a critical factor in after-hours and next-day trading.

InfoSpace.com Returns as Metasearch Engine

Like grizzled rock bands, old technology companies change personnel, go in and out of fashion, reinvent themselves, and sometimes return to formulas that were successful in the past.

I thought of the rock-star analogy when I noticed InfoSpace back in the news today.

As its contentious Wikipedia entry demonstrates, InfoSpace has enjoyed a colorful history, replete with an IPO, mergers and acquisitions, and a bipolar stock price that dropped from $1,305 in March 2000 to $2.67 by June 2002. Since then, the company has gone through more incarnations and reinventions than Madonna, though it doesn’t possess her marketing touch.

Enough about the past, though.

InfoSpace is looking back to the future, reclaiming and relaunching the InfoSpace.com search engine as a metasearch property that compiles and presents top results from market-leading search engines such as including Google, Microsoft Bing, Yahoo!, and Ask. (Okay, that last one might not be a leader, in the strictest sense of the term, and Bing and Yahoo are about to become indistinguishable, but let those cavils pass for now.)

To complement this standard approach to metasearch, InfoSpace will also include real-time search functionality as represented by updates from microblogging service Twitter.

The site is clean and well organized, I’ll give it that much, but I will reserve definitive judgment until I’ve used it a bit more.

MIPS Pushes Android into Home Entertainment

MIPS Technologies — former purveyor of RISC chips to computer-workstation vendors and now a vendor of processors used in a variety of home entertainment and networking devices – is hoping to find a revenue-spinning home for Google’s Android operating system beyond the realm of smartphones.

As reported by Network World, MIPS has made available software source code to anyone interested in creating Android applications for products that use the MIPS32 chip architecture.

Said MIPS in a statement:

“We are seeing an enormous amount of customer interest in Android on the MIPS architecture. We are working closely with customers and partners to ensure that critical technologies are available for developers to take advantage of Android for consumer electronics.”

Customers might be interested in exploring Android-on-MIPS applications, but can they make money from them? That’s the salient question, and one MIPs and its OEMs will answer in time.

For now, there’s some question as to whether Android, which entered the mobile market accompanied by hype and high expectations, can fulfill its early promise as a smartphone operating system.

Taiwan Semiconductor Seeks LED and Solar Acquisitions

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract manufacturer of computer chips, is preparing to make its first acquisitions in two years, according to a Bloomberg news item.

Interestingly, the company is looking at purchases outside the computer-chip space, instead scanning the horizon for new growth opportunities through acquisitions of companies involved in light-emitting diodes (LEDs) and solar technologies.

During an interview at TSMC’s Taiwan headquarters, Morris Chang, the company’s 78-year-old chairman and CEO, wasn’t explicit about acquisition targets but explained the general approach the company would take.

“We can start out maybe first purchasing a small company, but use that as a nucleus for growth. I think we have gotten into a situation where everybody seems to be really comfortable and not particularly hungry anymore.”

Well, I don’t know whether that’s entire true, but Chang and others must be concerned about the negative-to-tepid revenue growth in the conventional semiconductor market.

The chip-foundry market, in which Taiwan Semiconductor control holds 49-percent market share, is expected to record a sales decline of as much as 20 percent this year and will take until 2011 to return to the same levels as 2008, Chang told investors on July 31.

Meanwhile, the markets are booming in which Chang is seeking acquisition targets. Global sales of LEDs, used to illuminate television screens and other displays, are projected to double over the next four years, while solar-cell industry revenue is estimated to climb an average of 45 percent in the four years from 2010.

It’s no wonder Chang is pondering diversification through acquisition.