The Bloor Perspective: New HP, Cisco buying again and thin clients are here

This week Robin Bloor and his team of analysts look at an HP that has won a contract to give Microsoft advice on Microsoft apps, Cisco's latest acquisition and the not-so-dumb network computer...

It is just over three months since HP's acquisition of Compaq gave birth to the New HP. To the surprise of many it has been pretty much business as usual for the New HP and we've recently seen a number of interesting announcements. First, and perhaps most important, was the announcement earlier in the week that Microsoft is following the HP Way as HP won a contract to run help desk services for 61,000 Microsoft employees worldwide. HP originally had a deal to provide help desk services to Microsoft units outside of the US but the new deal greatly extends the service. Aside from being a business success in the services sector, there is a certain irony in the deal where Microsoft employees will be calling a HP help desk for help on using Microsoft products. A second announcement concerns the establishment of HP Financial Services as a new leasing and financial services subsidiary. With 1,500 employees, the company will provide leasing, trade-ins, sales of refurbished equipment, asset management and recovery services. The new business is expected to represent 4 per cent of HP's revenue and will be reported as one of the five separate business segments in HP financial statements. Obviously there are other announcements but these demonstrate the New HP is moving forward in the right direction. Most significant is the Microsoft deal. HP wants to get into services and while the contract does compare with some of the mega outsourcing deals that we've seen in the last year, it is big and you couldn't want for a higher profile customer on your books - if HP supports Microsoft products for Microsoft then why should other customers look elsewhere? It is worth bearing in mind that this is the New HP after just three months and many of HP's competitors believed the company would be stuck in integration battles for 12 or 24 months. While there are no doubt many issues still to be resolved, it looks as though the new company is beating everyone's expectations - so far, at least. *Let's go Cisco storage* The purchase of one company by another has long been a common enough event in the world of big business. Last week came news that the mighty Cisco has reached agreement to acquire Andiamo Systems, a developer of storage switching technology. Andiamo, which is Italian for 'let's go', was founded in January 2001 and has developed a range of intelligent switching products. It is expected Cisco will begin selling Andiamo switches in the guise of the Cisco MDS 9000 family before the end of the year. Andiamo's products boast of support for several protocols, including Fiber Channel, iSCSI and FCIP while the software services highlight traffic management capabilities, security and integrated diagnostics. It is difficult to evaluate just how much the acquisition will cost Cisco. The final price paid will be based on a number of factors including the sales of Andiamo products by Cisco in the three months before the sale closes and a multiplier based on Cisco's sales and market capitalisation at that time. With the sale due to close between February and April 2004, Cisco admits that the net purchase price paid will be somewhere up to approximately $2.5bn. This is a significant move by Cisco that is certain to shake up the incumbent storage vendors. With Andiamo already producing director-class and fabric multi-protocol switches, organisations such as Brocade, McData, QLogic, Vixel and the rest may soon find that they have a giant knocking on their door. John Chambers, CEO and president of Cisco, has stated: "This acquisition supports Cisco's strategy to enter into new growth markets, such as storage networking, where we believe we have the potential to be the number one or two player." The addition of these products to Cisco's existing storage networking products significantly enhances the company's potential to extend its customer base in the storage market. To achieve this, the company needs to acquire specialist storage skills and must work closely with software and service providers. Cisco is well positioned to cultivate over time a viable, profitable customer base for its storage offerings. *Thin client market tops 1 million annual shipments* It's been a long time coming but last year the PC's much-unloved illegitimate child, the thin client, finally hit the all-important 1 million shipments in one year mark. It wasn't celebrated of course. IDC, which has just completed a study of the thin client marketplace, is feeling pretty bullish about the thin client's possibilities. It points to considerable obstacles that it has overcome - Windows and the dominance of the PC being one of the primary ones. Despite that, it has soared to new heights, nailing 1.09 million shipments in 2001, with the expectation being a rise to 1.4 million in 2002. The US accounted for more than half of the shipments made through 2001 and Wyse Technology was the clear leader - as you might expect. One thing that you might not have expected is that Windows is still the dominant deployment on the thin client, thanks almost exclusively to the success of Citrix. The thin client has been booting around for a good seven years now. Back in the mid-1990s it served as something of a rallying token for Apple, Oracle, IBM and Sun as they outlined plans to halt Microsoft. IBM and Sun waxed lyrical about the Java apps that would flow across the network only to be picked up by a cheap, dumb, thin client. Many of them talked the talk but few of them walked the walk. IBM and Sun both touted some products for a couple of weeks, although we never actually saw one of Sun's NCs (network computers) as they were called then. Java didn't turn the world on its head and the thin client suddenly found itself at the heart of Windows installations - that's Citrix again. Nowadays it's more likely to hold a Linux kernel, some reasonable processing power and not much else but it's growing in popularity. The principle benefits of the thin client - even with a weighty operating system or browser being used to access a remote desktop - remain the same as they always were: making computing cheap and easy. Bloor Research is a leading independent analyst organisation in Europe. You can find out more at http://www.bloor-research.com or by emailing mail@bloor-research.com.