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Cisco claims unified computing is taking off
California blades are (finally) shipping
It took longer to get its "California" Unified Computing System out the door than networking giant Cisco Systems would have wanted, but in July the machines started shipping to customers.
Welcome to the server business, where delays in chips and servers are the bane of your existence.
Oddly enough, it wasn't Cisco that first announced that the California boxes were moving out of its factories into customers' data centers when it talked about its fiscal fourth quarter yesterday. BMC Software, whose BladeLogic system-management tools are part of the UCS product line, that told everyone several days ago that the California machines had started shipping and that it had received orders for BladeLogic as part of those Cisco deals in July after both companies had closed their most recent quarters.
Cisco had hoped to ship the California machines by the end of June, and this relatively minor delay in shipments might have been caused by adverse economic conditions and the lengthening sales cycle that all server buyers are facing as they try to peddle their wares into data centers large and small.
Cisco's fourth quarter ended on July 25, and it's not clear when in July the initial California shipments occured. It really doesn't matter, since the revenue derived from California would not have had a material impact on Cisco's numbers for the quarter, which saw sales drop by 17.6 per cent to $8.5bn and net income plummet by 46.3 per cent to $1.1bn.
Those who want most of the benefits of unified networking for servers and storage (and virtual networking for their server infrastructure) don't actually have to buy a California box, of course. They can buy into the Unified Communications strategy and get Nexus 7000 and Nexus 5000 switches and Nexus 2000 fabric extenders, which provide similar Fibre Channel-over-Ethernet functionality to collapse server and storage networks onto 10 Gigabit Ethernet backbones, and then toss in the Nexus ASR-1000 to provide virtual switching for virtual machines running on the servers.
All of that technology predates the California machines, which were launched in March to great fanfare, by a little more than a year. What makes California different from Unified Communications is that system-management features are woven into the switches with the UCS box, and Cisco is making the blade servers, which feature more main memory than standard Intel Xeon 5500 servers can support.
Cisco is happy to sell both a la carte Unified Communications switches and Unified Computing Systems, so long as customers are cutting checks for something.
The Unified Communications and Unified Computing System products are tossed into the Advanced Technologies group at Cisco, which posted $2bn in sales in the fourth quarter, down 19 per cent - that's down a lot less than routers, which had a 27 per cent drop to $1.5bn in Q4, and switches, which fell 20 per cent to $2.8bn.
Cisco didn't provide specific revenue numbers for the Unified Communications products, but did say in its financial presentation for Q4 that this product line had a 5 per cent decline from the year-ago quarter, which made it the strongest hardware product among a lot of other things, such as storage, video, wireless, security, and home-networking products.
Speaking in the conference call with Wall Street analysts yesterday, Cisco's chairman and CEO John Chambers said that these products were doing well. The Nexus 7000 end-of-row core switches and Nexus 5000 top-of-rack switches each had sequential revenue increases of over 100 per cent from Q3 to Q4, and the ASR-1000 virtual switch has over 1,000 new customers (220 of them are service providers) and orders are up 80 per cent year-on-year.
Later in the call, EVP of operations Rob Lloyd said it was a record quarter for the Nexus 7000 flagship switch, and that the customer count for the Nexus 5000 FCoE switches and their Nexus 2000 fabric extenders was approaching 1,000. He also confirmed that the California boxes shipped in the "later half" of Q4.
Lloyd also muttered something about making the UCS machines available to more markets over the "next several quarters" and reminded everyone that in addition to the initial B-Series blade servers for the California machines, Cisco was also going to roll out its C-Series rack servers for customers who want racks not blades.
Neither Chambers nor Lloyd put any numbers on California shipments or customer counts, but Lloyd gave the impression that Cisco is happy with what it has done this far. "I think the next couple of quarters is all about execution," Lloyd said. "So time will tell, but we are seeing very good market acceptance on our datacenter portfolio."
Chambers sought to manage expectations for the UCS lineup, but at the same time was optimistic about Cisco's prospects about jumping into the server arena and getting some business. No surprise - If Cisco didn't believe it could shoehorn itself in there and eat some share, it wouldn't have bothered.
"In terms of our market share outside of the network and the data center, it is really small," Chambers conceded. "And we are clearly taking on some very big traditional players there. But if you begin to think about our ability to grow the UCS system or our ability to grow an architectural play in the data center, suddenly we are playing for a $100 million, $200 million, or $300 million types of opportunities."
He added that the $85bn opportunity that Cisco is chasing in the data center "is a lot of money," but that thus far Cisco's pilot programs have gone well and that "all of a sudden, we are a player in the data center in terms of permission to participate."
Once Cisco gets its rack servers out the door and demonstrates that its memory extension technology works, you could make an argument that Cisco is as credible a player as Sun Microsystems, whose server future is anything but certain until the Oracle acquisition is done and Oracle has outlined the future roadmaps for Sparc and x64 servers - and calmed down the Sun customer base.
Chambers said that he expects UCS shipments to be significant in fiscal 2010, and that it would probably take until the second half for volumes to kick in. Lloyd added that some of the initial orders were not just from Fortune 50 customers, but also mid-sized businesses who are not typically on the bleeding edge. These smaller shops taking on UCS iron are probably hosting providers that are looking for some kind of edge in that tough racket by trying to cut operational costs and simplify their infrastructure.
It remains unclear if Cisco can charge the kind of premiums for the California boxes that it very much wants to. ®