HP throws the gauntlet down in front of Cisco. "Wanna fight? Pick that up."
HP might be in the middle of the delicate operation of quietly sawing itself into two separate companies but that doesn't mean the company is so intensely inwardly focused that it might miss out a chance to boost its market share of the global networking market.
Last month HP completed the acquisition of Aruba Networks and, thanks to some innovative apps technology that it got as part of the deal, is throwing down the gauntlet in front of Cisco's elegant hand-made wingtips.
Currently the networking market worldwide is dominated by Cisco Systems and that market, according to the latest analyst's estimates, is worth some $38 billion and rising. HP is hoping that it can prise a significant percentage of increased market share from Cisco's well-established grasp thanks to new software that will allow customers to manage entire networks from just a single, and comparatively simple, app. Hitherto, network management has largely been an ad hoc cacophony practised with a wide variety of differently tuned, dissonant instruments.
Commenting on the developments, HP's CEO Meg Whitman, the woman who will be in charge 'HP Enterprise', one half of the soon-to-be-sundered company, said, "There is a lot of market share that we can gain. Currently we are a Number Two player but the big difference between us and Number One is that we’ve got a really great portfolio, and we’re heading right to where the market is moving, which is both wired and wireless."
Despite HP's well-publicised earlier troubles (to bowdlerise Oscar Wilde's Lady Bracknell, "to lose one CEO, Hewlett Packard, may be regarded as a misfortune; to lose two looks like carelessness and the loss of three is a most worrying trend") one of Ms. Whitman's predecessors, axeman Mark Hurd, who resigned in August 2010 after being found to have been in serious breach of HP's standards of ethics and business conduct, did spend a lot of time and money on strengthening the company's networking portfolio through acquisition.
He paid some $2 billion buying the likes of 3Com and Colubris Networks but HP still lost out to Cisco. The company managed to increase market share by just eight per cent over four years, basically and simply because Cisco had a bigger and better range of networking products.
Last year's figures (from the research house Gartner) showed that Cisco was maintaining its dominance and retained a 49.7 per cent share of the global enterprise networking-equipment market, By comparison, HP's share was just 8.3 per cent. Wireless company Aruba Networks, (for which Meg Whitman paid $2.5 billion), had a mere 1.7 per cent market, thus bringing HP's grand total networking market share to 10 per cent.
The move to wireless access
Going forward, Aruba's role will be of the greatest importance HP Enterprise as the acquired company will be the foundation on which the superstructure of HP Networking will be built. Aruba's former CEO, Dominic Orr, has been given the job of increasing the sales networking products.
HP is betting at least part of the farm on the expectation that consumers, enterprises and residential alike, will inevitably move to wireless access to ensure they have enough bandwidth to meet their needs.
HP Networking reported sales of $2.63 billion last year. A sizeable number but, nonetheless, it equates to a mere 2.3 per cent of the company's total revenues. Aruba, in the same period, reported revenues of $729 million and has grown its business by 30 per cent per annum every year since 2009.
Cisco, meanwhile, had sales last year of $24.1 billion. Cisco spokesman John Choi, commented, "As the clear market leader, we have delivered unified wired, wireless and cloud-managed platforms to our customers for years and will continue to do so."
However, with long-time Cisco CEO John Chambers about to take a back seat much will fall on the shoulders of his successor, Chuck Robbins. He already has plans to reorganise Cisco's management hierarchy and revamp the company. All will depend on how successful he is at driving through the changes. If he goes in too hard and alienates staff, managing the alteration and transformation processes will be made all the harder and investors will get twitchy.
In the past Cisco's primary advantage over HP was that it has long been able to offer respected, tried, tested and trusted bundled offerings to the market. HP's strategy is to do the same, but with better and newer software and apps. With all of HP's networking brought together under one roof and in a single system, the company is hoping that customers, long locked-in to Cisco, will break free of their bounds and give it a try.
HP will also seek out new networking equipment partners and is reorganising its sales departments to focus on the new wired and wireless products. It's a gamble, but Cisco could well be more vulnerable now than at any time in recent years, so it's probably as good a time as any for HP to make a sizeable wager.
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