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Cisco Tells HP: It's Over

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What a week it's been for Hewlett-Packard (NYSE: HPQ  ) .

Just after the printing prince reporting a 28% earnings gain on 8% higher revenue in its first quarter, Cisco (Nasdaq: CSCO  ) said it would not renew a systems integrator (SI) agreement with HP.

Systems integrators are key to big-ticket technology sales, gathering and assembling collections of disparate products into functional whole systems. Both HP and its closest peer, IBM (NYSE: IBM  ) , are SIs in the sense that their professional services teams buy and deploy technology products for client engagements.

For HP, Cisco had long been a preferred supplier. No longer.

It's difficult to know exactly how this break-up will affect both companies. But we do know Cisco's intentions, thanks to a webcast hosted by Keith Goodwin, senior vice president of the networker's partner organization.

"We are taking this action to be transparent to both partners and customers -- we will compete with HP for future business," Goodwin said in the webcast and an accompanying blog post.

He also pointed to changing industry dynamics and the "evolving role of the network," which smacks of code-speak for "customers want to deal with one vendor, and we want to be it."

If that sounds familiar, it should. About a year ago, Cisco began touting what it calls a unified computing system, whereby some of its networking switches -- once intended just for moving and managing data -- were being remade with other components to act as servers, like the kind you'd buy from (surprise!) HP or Dell (Nasdaq: DELL  ) .

It's a vision similar to the one Oracle (Nasdaq: ORCL  ) CEO Larry Ellison trots out every time his company spends billions to add a new piece of conquered territory to its technology empire. IBM, Microsoft (Nasdaq: MSFT  ) , and, in the cloud, Google (Nasdaq: GOOG  ) , also pitch themselves as one-stop shops.

Now, Cisco and HP have fiefdoms of their own to tend to. And in empire building, there's no room for partners.

What will Cisco's next move be? Make your voice heard using the comments box below.

Google is a Motley Fool Rule Breakers recommendation. Microsoft is a Motley Fool Inside Value pick. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Google, IBM, and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool also owns shares of Oracle and is on Twitter as @TheMotleyFool. The Fool's disclosure policy has had enough for today. See you next week.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 20, 2010, at 4:36 AM, Timb0Bagg1ns wrote:

    Any company that selects a single supplier deserves everything they get - it used to be said that "no one got fired for buying IBM" - not anymore. Cisco don't have all the answers, neither do HP or any one else. Caveat emptor.

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