Will Hurd Departure Cool Off HP-Cisco Rivalry?

The heated rivalry between Hewlett-Packard and Cisco has been simmering for more than a year now, fueled in large part by the competitive fires between the two CEOs, HP's Mark Hurd and Cisco's John Chambers, known for their ambitious competitive streaks and grasp of the channel.

Now that Hurd has left HP under a cloud of scandal, however, will the rivalry take a time-out?

Don't bet on it, say channel partners.

"Let me answer your question with a question. When a nuclear bomb goes off and the mushroom cloud goes up for miles in the air, can time be rolled back to where it all goes back into the bomb that originally held it?" asked Mark Gonzalez, president of Nth Generation Computing, a San Diego-based solution provider. "No. Once the nuclear bomb goes off all you can do is hope that you're far enough away from the explosion to where you're not immediately vaporized."

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The "bomb" that did it, Gonzalez reasoned in an e-mail exchange with CRN this week, was Cisco's entry into the server space in March 2009 with its Unified Computing System (UCS) offering.

"When Cisco decided to go into the server business it set off a nuclear bomb, without understanding that it's easier for a company making 20 points of margin on x86 servers to go after a business that is used to making 60-plus points of margin," he said, referring to HP and Cisco, respectively. "I think the folks at Cisco are like the kids in the 1960s who thought they could avoid being vaporized by the atom bomb by crawling under their school desks. The genie is definitely out of the bottle."

Bob Olwig, vice president of business strategy at World Wide Technology, a St. Louis-based solution provider and a top Cisco VAR, similarly sees no less intensity ahead in the HP-Cisco rivalry.

Both tech titans, Olwig believes, are in it for the long haul.

"The die has been cast," Olwig said. "Both sides are dug in with substantial investments made in very innovative technologies like UCS and Matrix [HP's BladeSystem]. I think the industry is in for a long battle over the server and networking markets."

"Their strategy in terms of pushing commoditization on the networking side and attacking Cisco to try and erode their profit margins -- that's very likely the path they're going to continue on," said Ken Presti, president of Presti Research & Consulting.

HP's competitive strategy for Cisco is well-mapped-out, Presti said, though he conceded he wouldn't be surprised if HP's board looked outside -- to another industry or to a competitor's executive stable -- for Hurd's replacement.

"But they're such a server-centric company, they may want to stick a little closer to their knitting," Presti wagered.

NEXT: Personal Animus Between Hurd and Chambers?

HP executives this week e-mailed thousands of HP partners, seeking to reassure them that HP remains "absolutely focused on our objectives to deliver a broad and profitable line of products and services to our partners."

A high-ranking executive at a nationally known Cisco and HP solution provider said he was "very pleased to see the honesty" from HP's key channel executives, adding HP has been "very frank and open about the whole process."

But the Hurd exit is undoubtedly a distraction, said the executive, who asked not to be identified.

"Based on my observation of Mark and his enthusiasm and aggressiveness, having Cisco in his sights was a personal agenda for him, I think," said the solution provider. "There will be an internal focus for HP to get its ship righted, so in a sense, that will mean taking its eye off Cisco a little."

Other VARs, too, saw other priorities higher on HP's mind than Cisco -- especially with two major acquisitions, 3Com and Palm, still being digested.

"I don't really think his departure will affect the channel too badly," said Glenn Conley, president and CEO of Metropark Communications, a St. Louis-based HP partner and 3Com networking stalwart. "Right now, it's just more discussion points with our customers than anything else."

Despite HP's success in acquiring 3Com, for example, there's still the long-term matter of making sure 3Com channel partners are in sync with HP's strategy, Conley said.

"There is a learning curve for the 3Com-ers at how HP goes to market," he said. "It really has been like drinking from a fire hose recently. The pricing discounts are different, the way we order product is different, the people are different, the marketing is different, etcetera."

HP Networking, of which the former 3Com portfolio is now a part, isn't standing idly by, either. The company has scheduled seminars as part of what HP is calling the HP Enterprise Networking Roadshow, which kicks off Wednesday in New York and comes to five additional U.S. cities between next week and the end of October.

Cisco, too, isn't letting its guard down.

On the company's fourth-quarter earnings call Wednesday, Chambers described HP as a "great competitor" and said that Cisco hopes to take market share from its $114 billion rival, and it will "do it with class."

Hurd's and Chambers' respective competitive streaks certainly fueled the rivalry. But at the same time, said solution providers, both HP's and Cisco's evolving product road maps -- pointed at the data center -- were already on a collision course before it became popular to talk about the two companies as rivals.

"Was there a personal aspect to the animus between the two companies? I think so. But it was more than that," Nth Generation's Gonzalez said. "If you look at the main thrust of HP's hardware go-to-market strategy, it's all about the converged infrastructure [servers, storage and networking]. That strategy would have brought HP and Cisco into conflict, sooner or later, regardless of the personalities involved. The personalities just accelerated the process and made it more visible in the press."