Analysts believe the move is a sign of a strained IBM/Cisco relationship
Technology companies in the U.S. are battling the slowing global economy, and one of the way the firms are fighting falling profits and reduced sales is by partnering together to offer new product bundles. IBM is one of the largest companies in the technology world, but it isn’t immune to the pinch of the economy.
Network equipment maker Brocade Communications Systems is increasing the depth of its partnership with IBM, which Reuters believes is a sign that Brocade may be gaining market share at the expense of Cisco.
IBM will rebrand Ethernet switches and routers build by Brocade and sell them as IBM products. The rebranded networking gear will then be sold to mutual corporate customers according to the two companies.
Brocade CEO Michael Klayko said, "I think what you're going to see is an expansion of revenue because of the sheer reach that IBM has and their ability to include it in their own branded products and solutions that they develop. This is some interesting upside opportunity for us."
IBM has been selling Brocade products already, mostly storage devices, and currently accounts for about 10% of Brocade's sales. Brocade acquired the switches and routers IBM will be selling in its purchase of Foundry Networks acquired by Brocade last year.
Some analysts see IBM's move to sell other networking gear alongside the Cisco gear it typically sells as a sign that the relationship between IBM and Cisco may be strained. Cisco and IBM are considered to be direct competitors in the market. Reuters reports that an IBM spokesperson says that the relationship between IBM and Cisco is unchanged and that IBM is merely trying to offer a wider range of choices to its customers.
Analyst Zeus Kerravala said, "This is one of the most tangible proof points of the growth strategies for the data networking business that Brocade identified when it acquired Foundry Networks."
Cisco missed Wall Street projections in February and reduced sales via IBM could hurt future earnings.
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