Cisco announced on Monday an aggressive entrance into the server market for data and storage centers with its "California" line of blade servers that was developed in super-secrecy over the past two years.
Until yesterday, Cisco supplied only routers and switches to those large computer data centers, and now it essentially declared war on the gorillas in the sector, the companies which buy those routers and switches from Cisco IBM and HP.
The data center market is estimated at $50 billion per year, and Cisco's announcement allows it to expand its share in that market beyond its current 9%.
Among the smaller Israeli players who sell solutions to the data centers market is Mellanox Technologies Ltd. (Nasdaq:MLNX), which I recently added to my portfolio tracked by "Globes". Mellanox develops a wide range of semiconductor products, including adapter cards and integrated circuits, as well as software. It remains to be seen if the company joins, in any way, Cisco's venture.
For example, I know that Google, which owns giant data centers, collaborates with Mellanox in building its servers, geared for its specific needs. It may be that Cisco is also there, with the solutions it announced yesterday.
A second Israeli firm in the sector is Voltaire (Nasdaq: VOLT), which supplies software, switches, and servers for large data centers. According to Bank of America (Merrill Lynch) analyst Tal Liani, Cisco's new solutions could be direct competition to Voltaire, which offers similar architecture.
According to Liani, Cisco's entrance into the field is liable to push HP and IBM to collaborate with small suppliers in the field, such as Juniper (Nasdaq: JNPR) or Voltaire. These firms can fill in their missing switching technologies, in their competition with Cisco.
In the meantime, Liani maintains his "Sell" recommendation on Voltaire, with a target price of $2.70, even as the share touched a low last week of $2.00 per share. Liani believes the company has a chance to come back in the second half of the year because of new launches and recently announced deals, such as with IBM, for example.
Published by Globes [online], Israel business news - www.globes-online.com - on March 17, 2009
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