Lawyer Bait

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Thursday, January 7, 2010

Why Cisco needs to buy Verari, and why Dell IBM, Rackable, and HP will fight for it

I have been covering the Verari story for the past several weeks, talking with folks close to the situation every other day. I keep coming back to Why Cisco Needs to buy Verari:

1. Protect IP
2. Support the brand
3. Have a container play in the market
4. Maintain a level of credibility in a market they said they were entering - servers

The other reason they should make an offer is because they have a financial backer who will do the deal with them and pony up 50-60% of the cash.

So why would Cisco want to protect the IP? The technology is solid, Verari has customers, and if they don't Cisco must now go after another hardware manufacturer to secure solid (and deployed) server technology to make good on its announcement that it was going after HP's server business to get market share inside the data center.

There is also being in a position to address what a data center is since the move is clearly going towards modularity and container deployments in very key areas. If Cisco doesn't have a story, their competitors craft deals so Cisco can't play. Ouch.

Support the brand - Verari, when it comes out of the ashes, will be recapitalized with Carlyle, Citibank, Sierra Ventures and others out of the picture. In other words the company has a running head start in that it has customers, a pipeline, a brand, production, the whole nine yards supporting the brand. Cisco believed in it enough to do an OEM deal, now they get to put a Verari server in a pillow case for a data center technology beat down of the competition.

Have a container play in the market. For people who follow this blog and colleagues in the data center industry know I have been a strong proponent of containerized data centers for about two years - since before there was a lot of buzz about them anyway. Having a container play is absolutely crucial - why? Because companies who offer high performance computing, serve civilian and defense agencies, are in the oil and gas business, and cloud computing companies are all looking at and/or purchasing them. There was a question on Linked In a few weeks ago - 'why havent we heard about all these container deployments?' and there are a couple of answers both of which point back to 'we could tell you but then we'd have to kill you'. People don't want their strategic advantage broadcast to the world. Nor does the military. So containers are crucial - not for companies who need a couple of cabinets, but for companies who need hundreds of cabinets - containers are cheaper and more secure hands down.

Maintain a level of credibility - this one is crucial. I cannot and do not see companies today making large announcements that create seismic events in certain markets, pull back after a few months and say - Ha! Just kidding!. Cisco could buy Sun's server business and let Oracle ravage the software side, and that's about it. There are slim pickens for proven server technology out there where ther companies don't already have a relationship with IBM, Dell, and HP - Cisco's partners and in many circles now - the enemy.

Cisco solves a lot of problems for short money with this deal. On the flip side Cisco's competitors can create a lot of problems for Cisco for short money - real and in the press - by buying Verari. They keep Cisco out of the Server Hardware Club for a few more months, which is a lifetime in this business. and with the tech refreshes that need to happen in the next 12-24 months, a misstep or delay means a few hundred million are at stake.

This one will be fun to watch...

1 comment:

  1. how about better blade density (than UCS)...lower cost... nice atmospherics (cooling IP and green play) better aggregation switch performance.
    Cheaper blade server module for hit the COGS number for VBlock 0. Big gotcha....aggregation switch functionality does not support VLANs.....particularly dynamic.....need to fix that one to play in a VBlock.

    containers are ahead of the cloud market...can't build a business on that yet.....Cisco could play through but clearly Verari aka Carlyle can not.


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