The latest twist on Cisco's story is a "unified computing system" (UCS) that basically puts serious server hardware inside a high-end network switch, with everything tuned to slice virtual machines out of the whole package. Marrying network gear to the computing resources that need it sounds like it makes sense, but Cisco is playing a risky game here.
The product comes with glowing endorsements from industry leaders in almost every corner of the data center: VMware
Sounds like a complete package, right? Broad-line industry support across traditional rivalry lines, and everyone is happy?
Well, no. The UCS will compete directly with offerings from other server makers such as Hewlett-Packard
That wouldn't be so bad if the likes of HP and IBM weren't also big resellers of Cisco equipment. It's common practice to buy a gaggle of IBM servers already bundled with the Cisco switches and routers you need to fit the new hardware into your IT infrastructure. Cisco might be poking itself in the eye here. Only time will tell whether the goodwill lost between Cisco and some of its reselling partners outweighs the revenue from the new product lines.
Watching Cisco jump into consumer electronics and home networking was fine. Those were low-risk plays where Cisco didn't butt heads with any of its major partners. This time, the stakes are much higher, and I'm getting nervous. This stock is off my watch list until I see how the server guys react.
More risky business:
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.